Effects of industrial air pollution on the technical efficiency of agricultural production: Evidence from China

Abstract

With the increase in industrial plants in the rural areas of developing countries, the effects of industrial air pollution on the technical efficiency of agricultural production have attracted considerable attention. However, although some studies have investigated the effects of air pollution on crops' yields, only few of them have focused on how industrial air pollution affects the relationships among production factors and their technical efficiency. Using survey data collected from southwestern China, this paper analyses the effects of point-source air pollution on rice production by incorporating air pollution as an input in a translog production function. Our findings indicate that industrial air pollution lowers the marginal products of factors, alters the relationships of labour-capital and chemical-capital from complementarity to substitution, and changes the seed-chemical relationship from substitution to complementarity. Furthermore, the complementary elasticities of labour-chemical and labour-seed are reduced, whereas that of capital-seed is improved. Without considering the changes in the production function, the technical efficiency estimated using the traditional stochastic frontier analysis method appears to be overestimated compared with that estimated using a modified measure. The understanding of the effects of industrial air pollution on technical efficiency will help researchers in making a sound estimation of agricultural loss and provide helpful insights for policy-makers.