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Livestock production has increased in Inner Mongolia, China, despite widespread documentation of grassland degradation. To begin investigating the relationship that produces these trends, we studied farm level decisions of herder households. We estimated herders’ household economic efficiency in typical steppe in Inner Mongolia in 2009 and 2014 using household survey data. During this 5-year period, herders’ operating cash margins decreased, but not significantly. However, their enterprise trading profit, enterprise gross margin, operating profit, net profit, and return on sheep unit all increased significantly. The correlation between stocking rate and the economic variables were all significant, except cash margin and return on sheep unit. The ANOVA analysis showed that as the stocking rate increased, the return per sheep unit increased first and then decreased, although the return per hectare grassland kept increasing.


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