The Impact of Factor Price Change on China’s Cotton Production Pattern Evolution: Mediation and Spillover Effects

Abstract

Cotton is an important agricultural crop and strategic resource. China is currently the country with the largest global cotton production and consumption, but few studies have systematically analyzed the dynamic relationship between factor price change (FPC) and cotton production pattern evolution (CPPE). Based on provincial panel data from the main cotton planting areas from 1985 to 2021, this paper used spatial econometric models to empirically analyze the impact of FPC including labor price, production material cost, and mechanical cost on CPPE from the perspective of mechanical substitution difficulty. The findings are that (1) FPC significantly affected CPPE, specifically the rise of labor price induced the demand for mechanical substitution, resulting in a significant cotton agglomeration effect; (2) spatial econometric analysis found that FPC had a significant spatial spillover effect on CPPE in adjacent regions; and (3) the transfer analysis found that higher mechanical substitution difficulty exerted an inhibitory effect on cotton planting, leading to a gradual shift of the main cotton planting areas from the Yangtze River Basin and Yellow River Basin with high labor prices to the Northwest Inland region with lower labor prices. Updating the production technology and improving the efficiency of cotton specialization are effective strategies. The results are valuable for policy making related to the development of China’s cotton industry.