Abstract
This paper aimed to study how industrial air pollution impacts crop yield by investigating the relationship between output and changes in factors. A translog production function was estimated in the context of stochastic frontier analysis using data collected from a field survey in the case of corn. The interaction between the factors as well as the impact of industrial air pollution on the relationship between factors was analyzed using numerical simulation, followed by the estimation of economic losses of corn yield in the polluted area. Results show that industrial air pollution causes a decrease in crop yield for two reasons. First, industrial air pollution changes the output elasticities of production factors and reduces its absolute amount. Second, industrial air pollution causes the relationship between labor and capital, labor and chemicals, capital and seeds to change from substitutable to complementary; it also resulted in an opposite result for the relationship between capital and chemicals. The paper presents a new explanation of how industrial air pollution affects agricultural production from an economic perspective.
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