Measuring and decomposing TFP incorporating environmental components: applications for rice farmers in Hubei Province, China

Abstract

This study is aimed at assessing agricultural and environmental performance and analyzing whether observable productivity changes stem from technologically induced or environmentally induced components. Based on individual farm household data from Hubei Province covering the period 2004 to 2010, we decompose total factor productivity (TFP) into technical efficiency change (TEC), technical change (TC), scale effect (SE), and the environmentally related allocative effect (AE) as a means of evaluating environmental performance. The empirical results indicate that the average TFP decrease rate is 2.8%, which reflects the comprehensive outcome of all relevant components. Regarding direct pollution-related inputs (fertilizer and land), improving nitrogen (N) fertilizer application efficiency and land use efficiency can contribute not only to less cropland expansion and greater productivity growth but also to N loss reduction and N pollution abatement in the short and long term. Concerning indirect pollution-related inputs (labor, intermediate input, etc.), although increases in quasi-fixed inputs (labor and intermediate input) can lead to both N and productivity growth, the magnitude of the positive effects of quasi-fixed inputs on productivity cannot offset the negative effect of fertilizer on productivity; thus, more scientific and economical fertilizer application is the key to improving agricultural productivity and benefiting the environment and the ecosystem.

Keywords:

• Nutrient allocative inefficiency
• stochastic nutrient frontier
• TFP decomposition classification: environment & agriculture
• agriculture & environmental sciences

Reviewing editor:

• Manuel Tejada, Universidad de Sevilla, Spain

SUBJECTS:

• Agriculture & Environmental Sciences; Development Studies; Environmental Economics

Disclosure statement

No potential conflict of interest was reported by the author(s).

Correction Statement

This article has been corrected with minor changes. These changes do not impact the academic content of the article.

Notes

1 http://faostat.fao.org/.

2 RTS refers to returns to scale.

3 Note that the TEC is not the pure technical efficiency change, which can be further decomposed into pure technical efficiency change and allocative efficiency change.

4 The data were obtained from the China Statistic Yearbook (2011).

5 The specific data processing statement can be found in the Supplementary Appendix.

6 All of the inputs and outputs such as land, labor, intermediate input, fertilizer and capital refer to the inputs and outputs in the process of rice production based on the fourth section (farm household production and operation status) of the original questionnaire, which included the specific input and output situation of each crop.

7 1 mu equals approximately 0.067 hectares.

8 In this paper, capital does not reflect the economic notion of capital appropriately. Hence, the capital variable used in this study should be interpreted with caution.

9 The long-term inputs depreciated consistently over ten years.

10 The CPI was obtained from the National Bureau of Statistics (see http://www.stats.gov.cn/). Compared with other price indices and financial indices, the CPI may not be the best choice for reflecting the true value change of intermediate input and capital, but it is a good choice for reflecting the true price change of farmers’ inputs concerning our research framework.

11 See http://vdb3.soil.csdb.cn/.

12 See http://vdb3.soil.csdb.cn/.

13 Since the prices of quasi-fixed input are measured by price indices that do not reflect the price changes faced by individuals, we estimated the relationships between the fertilizer price faced by individuals (which can be calculated from the dataset) and different quasi-fixed inputs used per land unit through the OLS model. The regression results suggest that the coefficients were statistically significant at the 10% level, and their signs can provide a preliminary view of the relationships among fertilizer price and different quasi-fixed inputs.

14 The F value and p value obtained from the F-test for equal mean technical efficiency scores over years are 2.28 and 0.03, respectively.

15 See http://www.gov.cn/xinwen/2021-01/17/content_5580552.htm.

Additional information

Notes on contributors

Yuan Ma

Dr. Yuan Ma received the doctoral degree in Economics from University of Göttingen, Germany in 2021. Her areas of interests include Agricultural Economics and Environmental and Resource Economics. 

Bernhard Brümmer

Prof. Dr. Bernhard Brümmer is working as Professor at Department of Agricultural Economics and Rural development, University of Göttingen. His areas of interest include measurement of productivity growth and transmission of policies on rural markets, reform of the Common Agricultural Policy, spatial and vertical market integration analysis.

Xiaohua Yu

Prof. Dr. Xiaohua Yu is working as Professor at Department of Agricultural Economics and Rural development, University of Göttingen. His areas of interest include Agricultural Economics, Environmental Economics, Behavioral Economics, Data Sciences and China Economy.