The shadow price of nitrogen

Abstract

PurposeThe most recent and prestigious scientific research shows that nitrogen leaching caused by over-used nitrogen fertilizer rapidly acidifies all soil types in China, revolutionizing the basic understanding of the mechanism of soil acidification. The purpose of this paper is to study the impact of nitrogen on soil acidity over the long run, which is the shadow price of nitrogen.Design/methodology/approachIn a discrete dynamic programming model, this paper compares the nitrogen application and soil pH between optimal nitrogen control that takes the shadow price of nitrogen into consideration and myopic nitrogen control that ignores that shadow price. Using a five-year panel experimental data on a rapeseed-rice rotation, this paper simulates and numerically solves the dynamic model.FindingsBoth theoretically and empirically, this paper shows that the over-use of nitrogen and the decline in soil pH are explained by ignorance of the shadow price of nitrogen. Compared with optimal nitrogen control, myopic nitrogen control applies more nitrogen in total, resulting in lower soil pH. In addition, over-use in the first season contributes to soil acidification and the carry-over effects mitigate that problem.Originality/valueThis paper enriches the literature by extending the study of the environmental impact of nitrogen leaching to its impact on the long-term loss in agricultural production, providing a new theoretical framework in which to study soil acidification rather than conventionally treating soil acidification as a secondary consequence of acid rain, and showing the possibility of using nitrogen control to mitigate soil acidification when lime applications are not feasible due to socio-economic constraints.