Sources of Total-Factor Productivity and Efficiency Changes in China’s Agriculture

Jianxu Liu,Shutong Liu,Songsak Sriboonchitta,Changrui Dong,Sanzidur Rahman

doi:10.3390/agriculture10070279

Abstract

The core of agricultural development depends on agricultural production efficiency improvement, and total-factor productivity growth is its significant embodiment. Hence, it is essential to address the question of “how to improve China’s agricultural productivity and efficiency in order to achieve growth and sustainability of agriculture in the future”. This paper estimates indices of China’s agricultural technical efficiency (TE) scores, total-factor productivity (TFP), and its two components, technological change/progress (TC) and technical efficiency change (EC), using provincial-level panel data of 30 provinces from 2002 to 2017 by applying a stochastic frontier approach (SFA). The paper also identifies determinants of TE, TC, and TFP using selected indicators from four hierarchical levels of the economy, i.e., farm level, production environment level, provincial level, and the state level, by applying a system-GMM method. Results reveal that agricultural labor, machinery, agricultural plastic film, and pesticides are the significant drivers of agricultural productivity, with no significant role of land area under cultivation. Constant returns to scale exist in China’s agriculture. The agricultural technical efficiency level fluctuated between 80% and 91% with a stable trend and a slight decline in later years, while TFP improved consistently over time, mainly driven by technological progress. Among the determinants, government investment in agricultural development projects significantly drives TC and TE, while the experienced labor force significantly increases TE. The disaster rate significantly reduces TE but promotes TC and TFP. The literacy rate significantly improves TC and TFP. However, government expenditures in “agriculture, forestry, and water” significantly reduce TE, TC, and TFP. Policy recommendations include (1) increased levels of mechanization and agriculture film use while avoiding an increase in pesticide use, (2) a continued increase in government expenditure in agricultural development projects, R&D to improve technological progress, and diffusion of modern agricultural technologies, and (3) investment in education targeted at the farming population in order to continue the growth in the productivity and sustainability of China’s agriculture.

Highlights

Agriculture is the primary source of food production for human society and a foundation of national economic development [1], especially for developing economies
The results reveal that government comprehensive agricultural project development investment, household savings, and the proportion of the rural elderly population have significant positive influences on the technical efficiency (TE) score, and government expenditure on “agriculture, forestry, and water” and the agricultural disaster rate have significantly negative influences
The results showed that the rural elderly population had a significantly positive influence on the improvement of technical efficiency, implying that under the smallholder family management model in China, the work experience of the elderly labor force is the main driver of agricultural technical efficiency, which is consistent with the research conclusion of Khanal et al [44]

Summary

Introduction

Agriculture is the primary source of food production for human society and a foundation of national economic development [1], especially for developing economies. As the largest developing country in the world, the Chinese government attaches great importance to the development of its Agriculture 2020, 10, 279; doi:10.3390/agriculture10070279 www.mdpi.com/journal/agriculture. Since the reform and opening-up of the economy, China’s total agricultural output has increased rapidly [2]. Intensive use of inputs is believed to be behind such rapid growth in output. As China’s economic development entered a new phase, the traditional growth model became more and more unsustainable because of its reliance on the increased use of agricultural factor inputs [3]. The key to solving such a high reliance on input increase is to improve agricultural productivity [4]

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Results

Conclusion