Shadow prices of agrochemicals in the Chinese farming sector: A convex expectile regression approach

Abstract

The use of agrochemical inputs has significantly enhanced agricultural yields in China; however, their excessive utilization has also caused a range of environmental issues. This paper examines the costs associated with reducing agrochemicals by employing shadow prices, which represent the value of the marginal product of agrochemicals, to further develop cost-effective environmental policy measures for reducing their usage. To this end, the shadow prices of agrochemicals have been assessed by adopting a newly developed convex expectile regression approach and using statistical data from 31 provinces in China spanning from 2005 to 2020. Furthermore, the present study investigates the disparities between shadow prices and market prices for different agrochemicals across various regions in China. The findings suggest that the costs of reducing chemical fertilizers are higher than those of reducing pesticides and plastic films. Moreover, the results indicate that central China exhibits relatively high potential for decreasing agrochemical usage. Finally, these findings can inform the Chinese government's restructuring of producer support and environmental policy in a cost-effective way to mitigate agrochemicals use in the future. Additionally, the research method employed in this study holds potential for extension to other agrochemicals-dependent countries.