Does Outsourcing Service Reduce the Excessive Use of Chemical Fertilizers in Rural China? The Moderating Effects of Farm Size and Plot Size

Abstract

The excessive use of chemical fertilizers (OCF) is one of China’s main sources of agricultural nonpoint source pollution. It is debatable whether outsourcing service adoption (FOS) reduces OCF. This article argues that farm size and plot size can moderate the effectiveness of FOS in reducing OCF. Particularly, organizations earn more profits when they provide outsourcing services to large-sized farms and plots, thereby preventing their opportunistic behavior and reducing the OCF. Based on the survey data of wheat growers from six major grain-producing counties in Anhui Province, China, the Cobb–Douglas production function is used to measure the OCF, and ordinary least squares (OLS) estimation is used as a benchmark. In addition, propensity score matching (PSM) is used to eliminate the selection bias, and two-stage least squares estimation (IV-2sls) is used to eliminate endogeneity. The results indicate that approximately 90% of the sampled households used excessive fertilizers, signifying that the excessive use of chemical fertilizers in China’s agricultural production remains a serious problem. FOS reduces the OCF on large farms and plots. However, the effectiveness of FOS in reducing OCF disappeared when it was provided to small farms and plots. Extending FOS and organizing efficient land transfers should receive equal consideration from policymakers.