THE RESEARCH ON THE INTERACTION EFFECTS OF RURAL

LOGISTICS AND ECONOMIC DEVELOPMENT

Xuegang Chen and Jianqin Zhou

School of Economics and Management, Beijing Jiaotong University, Beijing, China

Keywords: Rural logistics, Economic development, Interaction effects.

Abstract: There are interaction effects between rural logistics and economic development. The effect rural logistics

has on the economic development presents as an S-shaped curve. So the interaction effects between rural

logistics and economic development vary at different stage. It’s necessary to analyse the interaction effects

to make the appropriate policies to promote the development of rural logistics. A model is constructed to

analyse the interaction effects. Then the contribution that rural logistics makes to economic development in

China is discussed. The interaction effects at present imply a result that the rural logistics elasticity

coefficient of economic development is less than 1. Finally, some policies to develop rural logistics are

proposed.

1 INTRODUCTION

As a large agricultural country, the important role of

rural logistics in the development of the national

economy is self-evident. The research on rural

logistics is also carried out extensively. Lu Jiang

pointed out that logistics about agricultural products

should be attached importance to, which provides

logistics security for building new socialist

countryside. The backward logistics equipment and

poor operation models are important factors which

lead to keep farmers’ income at low level even with

the increasing production. The application of new

logistics concepts and technologies is a very

important method to build new socialist countryside

(Lu jiang, 2006). With the summary of the

development characteristics of modern logistics in

developed countries, Wei Jigang put forward that

when concerned with the development of the

logistics in urban and rural, agriculture logistics and

rural logistics should be paid more attention to than

urban logistics (Wei Jigang, 2006).

Although rural logistics is so important, the

overall development of rural logistics is in low level

and low speed. There are some obstacles in rural

logistics, such as poor logistics infrastructure, high

transaction costs, backward logistics technologies

and low rate of the application of modern

information technologies. Relative to the

development level of overall economic, the

development of rural logistics is not satisfactory. So

many experts and scholars proposed

countermeasures and suggestions for the

development of rural logistics (Deng Shuhong and

Wei Feng, 2009). It is one of the most familiar

advices that the government should attach great

importance to the promotion of logistics

infrastructure in rural areas. The starting point of

these proposals implies that the development of rural

logistics should be supported by other economic

departments. However, there are some limits in these

studies. Because the rural logistics is a part of

national economy, there is a relationship between

them and the development scale of rural logistics

must match with the scale of the overall economy.

Therefore, empirical study is needed to educe the

relationship between the rural logistics and

economic development before the actual logistics

planning in rural areas. When the development of

rural logistics is in small scale stage and isn’t

conducive to economic development, it’s necessary

to increase investments to promote rural logistics.

When the scale of rural logistics is large enough,

policies should mainly be assigned to focus on how

to change the logistics development into an

important force for economic growth through the

optimization of rural logistics. In total, it is crucial to

find the appropriate scale of rural logistics and

policies should be put forward based on the principle

of mutual benefit for both of the development of

167

Chen X. and Zhou J..

THE RESEARCH ON THE INTERACTION EFFECTS OF RURAL LOGISTICS AND ECONOMIC DEVELOPMENT.

DOI: 10.5220/0003487501670171

In Proceedings of the 13th International Conference on Enterprise Information Systems (ICEIS-2011), pages 167-171

ISBN: 978-989-8425-54-6

 2011 SCITEPRESS (Science and Technology Publications, Lda.)

rural logistics and national economy.

Therefore, this paper analyzes the role of rural

logistics in the regional economics growth from the

quantitative point of view. Based on the result, the

matched scale of rural logistics and how to make

appropriate rural logistics policy are discussed,

which may do good to rural logistics planning.

2 MODEL OF THE EFFECTS OF

RURAL LOGISTICS ON

ECONOMIC GROWTH

There are many characteristics of rural logistics, so it

is necessary to adopt some of the sophisticated

theories and methods of modern logistics, especially

the quantitative research methods. Empirical

research methods have been maturely used in the

study of regional logistics. Wang Jun used the GDP

to represent the level of economic development,

while the level of development of the logistics

industry represented by the goods turnover (Wang

Jun, 2004). Then he revealed the relationship

between logistics industrial and economic

development by using the econometric approach.

Tan Qingmei et al used cargo turnover and volume

of passenger transportation as a unified index to

reflect the regional logistics capability, and analyzed

the relationship between logistics and economy in

Jiangsu Province by using regression approach (Tan

Qingmei and Wang Zilong, 2005). In quantitative

research about regional logistics and regional

economic growth, passenger and freight traffic

volume or passenger and freight traffic turnover are

always used to describe the development level of

logistics, and GDP is used to describe the economic

growth. To research the relationship between

regional economic and logistics, researchers mostly

use these econometric models: (1) regression model;

(2) the logic of economic growth trends (Logistic)

model; (3) co-integration analysis; (4) panel data

analysis (Song Shanmei and Xie Huiqiang, 2009). In

the paper, the interaction effects between the rural

logistics development and economic development

are analyzed with empirical research method, which

is maturely used to study regional logistics..

2.1 Data Resources

In this paper, the level of economic development is

represented by GDP (Wang Jun, 2004; Tan Qingmei,

2005), while the level of rural logistics is

represented by freight traffic volume of agricultural

products.

Wu Zhihui et al indicated that it’s

reasonable to use freight traffic volume to represent

the level of logistics development (Wu Zhihui and

Yu Qiaoyun, 2008). She pointed out that both of the

freight traffic volume and freight traffic turnover

speed have important influences on the development

of regional logistics. Then she analyzed the

influence that logistics had on the economic growth

of the three economic zones. The agricultural

products from farmers are eventually put into the

circulation through the logistics channels, so the

total freight volume of agricultural products is

calculated by the sum of the weight of farmers’

selling agricultural products, animal products and

aquatic products.

2.2 Gompertz Model

Gompertz model was designed to forecast the

population growth by the life insurance expert,

B.Gompertz in UK in 1820. Then the model was

used in market forecasting by the American scholar,

R.Prescott (Gu Jibao, 2010). And later it was widely

used for description and prediction in biological and

industrial growth. The function is as follow.

(/)

bbX

(1)

Where, Y is the dependent variable and X is the

independent variable. b

and b

are unknown

constant. Its function curve is shown in Figure 1.

Figure 1: Function curve of Gompertz model.

As shown in Figure 1, the curve of Gompertz

model

is a typical S-shaped curve. Note that in the

left side of the turning point

(,)XY

, the curve is

concave bec

ause

'( ) 0, ''( ) 0yx y x>>

, while in the

right side of the turning point the curve is convex

'( ) 0, ''( ) 0yx y x><

. When

→∞, the curve is

close to a horizontal asymptote.

The contribution that rural logistics makes to

regional economic development can also be

described by the Gompertz model. The effect trend

ICEIS 2011 - 13th International Conference on Enterprise Information Systems

168

of freight traffic volume of agricultural products (x)

to GDP(y) is also presented as the S-shaped curve.

The development of rural logistics lags behind the

regional economic growth in the early stage, and its

contribution to economic growth is not obvious with

a flat trend. While the rural logistics is developed to

a certain degree, its contribution to the regional

economy may stand out with a rapid rise trend. After

the scale of rural logistics and the level of logistics

management are developed to a certain extent, the

contribution which the rural logistics makes to the

regional economy may accordingly reach the

maximum and then gradually become stable.

2.3 Empirical Research

Firstly, China's GDP during 1990-2008 and the total

freight traffic volume of agricultural products per

year are given in Table 1.

Table 1: China's GDP and freight traffic volume of

agricultural products.

Year GDP(billion

Yuan)

Freight traffic volume of

agricultural

products(thousands tons)

1990 1866.78 258003.57

1991 2178.15 270083.18

1992 2692.35 265372.87

1993 3533.59 265465.00

1994 4819.79 289315.60

1995 6079.37 282718.29

1996 7117.66 332219.04

1997 7897.30 367373.87

1998 8440.23 361125.16

1999 8967.71 385832.92

2000 9921.46 424534.22

2001 10965.52 425891.41

2002 12033.27 443147.41

2003 13582.28 456802.34

2004 15987.83 453026.16

2005 18321.74 544953.21

2006 21192.35 557975.40

2007 25730.56 550679.94

2008 30067.00 577907.39

Based on the model constructed before, now we

use the GDP (y) which indicated the level of

economic development as the dependent variable,

and freight traffic volume of agricultural products

(x) as the independent variables, indicating the level

of logistics development in rural areas. Here we

adopt the SPSS17.0 to fit the S-shaped curve and get

the S-shaped curve equation as follow:

1048593.36

(11.891 )

−

(2)

Where the correlation coefficient

R2=0.941,P=0.000 achieve the significant level,

indicating that the positive effect China's rural

logistics have on economic development indeed

presents as the S-shaped curve. The fitting image is

shown in Figure 2.

Figure 2: Fitting curves of GDP and freight traffic volume

of agricultural products.

3 THE SCALE AND

DEVELOPMENT STRATEGIES

IN RURAL AREAS OF

LOGISTICS TO MATCH WITH

ECONOMIC DEVELOPMENT

LEVEL

Having analyzed the positive effect that the rural

logistics have on China’s economic, it’s necessary to

adopt effective policies to promote the development

of rural logistics. In practice, because the level of

logistics development in rural areas can not always

match with the level of economic development, the

degree of the contribution that rural logistics makes

to economic development may not the same. That’s

why appropriate policies that made by government

should based on the regional economic environment,

i.e. the development level of rural logistics should

match with the development level of economic.

Before making the logistics policy, no matter the

infrastructure construction or investment scale and

intensity, it’s necessary to identify the interaction

effects between them.

THE RESEARCH ON THE INTERACTION EFFECTS OF RURAL LOGISTICS AND ECONOMIC DEVELOPMENT

169

3.1 The Interaction Effects between

Rural Logistics Development and

Economic Development

There are interaction effects between the level of

rural logistics development and economic

development, including pushing effect and pulling

effect. When studying the regional logistics, the

interaction effects are always described by regional

economic logistics flexibility (Tan Qingmei and

Wang Zilong, 2005). In this paper, the method is

adopted and improved to explore the interaction

effects between rural logistics and rural economic

development. In economics, elasticity is used to

describe the degree that an economic variable

changes under the other economic variables’

influence. Based on the definition of elasticity in

economics, the function that can be used to calculate

the rural logistics elasticity of economic

development is given as follow:

dy y dy x

dx x dx y

==i

(3)

Where x indicate the level of rural logistics

development, and y indicate the level of economic

development. When

>1, that for every 1%

increase of rural logistics industry will bring the

increase rate of economic growth more than 1%,

indicating the rural logistics performs pulling effect

on the overall economy. Similarly, the rural logistics

performs pushing effect on the overall economy

when

E <1. If 1

E = , that means the development

of rural logistics capabilities keep the same pace

with the development level of economic.

The rural logistics elasticity of economic

development can be calculated based on the function

given above:

1048593.36

dy x

dx y x

==i

(4)

Further obtained, when

E =1, indicating that the

development of rural logistics can keep up with the

development of our national economy when the

freight traffic volume of agricultural products is

equal to 1048593.36 thousand tons. And the

interaction effects of rural logistics and our national

economy is relative perfect at this stage. When

x<1048593.36 thousand tons, however, supports

from the national economy are urgent needed for the

development of rural logistics. That means the

development of rural logistics will mainly reckon on

the country increasing its investment strengthen in

the area. When x>1048593.36 thousand tons, the

development level of China's rural logistics over the

development level of overall economic with the

pulling effect on the economy. At this stage, the

modes of rural logistics development need to

transfer: from extensive to intensive and from

relying on state investment to strengthen the

logistics management.

3.2 Policy Recommendations for the

Development of Rural Logistics

A Until the end of 2008, China’s freight traffic

volume of agricultural products reached 577907.4

thousand tons, which is still far below the level of

1048593.36 thousand tons. As analyzed above, the

key point for developing rural logistics at this stage

is that our country should strengthen policy guidance

and strengthen investments. Specific policies

advices are proposed as follows:

(1) Strengthen the construction of logistics

infrastructure in rural areas. Logistics infrastructure

plays a decisive role at the early stage of the

development of rural logistics. At present, logistics

infrastructure in rural areas lags far behind the

development of regional economy. That is an

important factor which limits the development of

rural logistics. So the first priority is strengthening

the investments for the construction of rural logistics

infrastructure facilities.

(2) Improve the informationization level in rural

areas. Promoting the informationization process in

rural areas is an important part of the construction of

new countryside in China. Through the project,

information such as the agricultural market supply

and demand, trade, prices, can timely and accurately

delivery to farmers. That will reduce the

uncertainness and blindness in agricultural

production and selling. At the same time, through

the development of online trading platform like e-

commerce, transaction costs can be reduced while

the logistics efficiency and service level improved.

(3) Develop the rural logistics technologies and

strengthen the training of professionals. With the

development of modern logistics, many advanced

logistics technologies achieved rapid development

and improvement. But the circulation of agricultural

products in China is still facing problems such like a

low rate of primary processing and a high rate of

loss. As data shows, the circulation decay loss rate

of vegetables, meat, aquatic products even reached

20-30%, 12%, 15%, and annual loss of fruits and

vegetables only even reached more than 100 billion

Yuan. Therefore, we should vigorously develop

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170

professionals that master the knowledge of logistics.

And more attention should be paid to the research

and practice of rural logistics technologies. These

measures may avoid the loss of agricultural products

in the logistics chain, which lead to keep farmers’

income at low level even with the increasing

production.

(4) Develop rural finance. The development of

rural finance affects the development of agricultural

and the rural logistics. Financial support is

especially needed at the initial stage of the

development of rural logistics. At present China's

rural financial services and products are relatively

simple, that makes it have little efforts to support the

development of rural area economy. So it’s

necessary to develop rural finance to ensure the

financial support in agricultural production and

logistics development.

4 CONCLUSIONS

A regression model is constructed to analyse the

interaction effects between rural logistics

development and economic development. Then

China is taken as an example of empirical research.

The research has some practical significance. On

one hand, through the regression model of rural

logistics and economic development, quantified

analysis of the relationship between them will be

available. The result will benefit the forecast of the

scale of rural logistics and economy. On the other

hand, because the interaction effects vary at different

stage, policy makers can find which state it is at

present through the interaction effects analysis

combined with the regional economic realities. That

is helpful for making appropriate policies for rural

logistics development and rural logistics plans.

Finally, according to the interaction effects in China

at present, policy recommendations that meet the

current needs for the development of rural logistics

are proposed.

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Lu Jiang, 2006. General Review of the Development of

China Logistics Industry in 2005 and the Perspective

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Wei Jigang, 2006. Reference, Experience and

Characteristic of Logistics Development in Developed

Countries. China Business and Market 10, 15-18

Deng Shuhong, 2009. Wei Feng. Review of Rural

Logistics Research. Modern Agriculture 2, 62-64

Wang Jun, 2004. Empirical Analysis on the Effects of

Chinese Logistics Industry on Economic Growth.

SCI/TECH Information Development & Economy

14(1):69-70

Tan Qingmei, Wang Zilong, 2005. Elasticity of the

Regional Economic Logistics. Statistics and Decision

5, 56-57

Song Shanmei, Xie Huiqiang, 2009. Regional Logistics

Development and Regional Economic Growth in

China - A Case Study in Guizhou. China Economist

11, 267-268

Wu Zhihui, Yu Qiaoyin, 2008. Effect Analysis of

Regional MF Industry in Three Economic Zones for

Regional Economy Growth, Journal of Bejing

Jiaotong University(Social sciences Edition) 7(1), 43-

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