Capital deepening and land average grain yield convergence: Evidence from China

Abstract

The shift of agricultural labor force to non-agricultural sectors has paralleled China's economic development, leading to a substantial rise in labor costs relative to capital. Consequently, the agricultural production has witnessed a shift towards capital-intensive practices. The capital deepening coincides with the significant increase in China's grain output while the main cause of capital deepening in China's grain production is poorly understood. This study examines the effect of increasing in various capital investments on the grain yield growth and growth convergence in China's main production areas, based on the data collected from the data set of the Compilation of Cost-Benefit Data of Agricultural Products (CCBDAP). Results show that the increases of chemical fertilizer, pesticide and machinery input have played key roles in the increase of grain yield. For early indica rice, japonica rice, wheat and maize, the average land output bears a β convergence. These findings suggest that more capital investments are supposed to accelerate the growth of grain yield per unit of land, take the opportunity of practicing the cross-provincial balance system of occupation and compensation of cultivated land. Moreover, strategic adjustments to the spatial distribution of grain cultivation are recommended to maximize the utilization of limited arable land resources while upholding national food security objectives.