The Influence of Labor Price Change on Agricultural Machinery Usage in Chinese Agriculture

Abstract

The substitution between rural labor and machinery has been a key determinant of farm production, structure, and efficiency in most developed countries and is expected to play a key role in shaping the future of Chinese agriculture. Using disaggregated farm-level data from Hebei and Shandong provinces of China, we calculated the Allen and Morishima elasticities of substitution between labor and machinery. These elasticities were based on seemingly unrelated regressions and three-stage least squares estimates of the translog cost function and input cost share functions. In contrast to previous studies, we dissaggregate machinery inputs into three categories: large, medium, and small. In addition, the issue of endogeneity in output quantity and input prices is also addressed. The results show strong evidence of substitution between labor and the three categories of machinery inputs. The findings also support substitution among the three categories of machinery themselves. La substitution entre la main-d'oeuvre agricole et la machinerie constitue un déterminant fondamental de la production, de la structure et de l'efficacité des exploitations agricoles dans la plupart des pays développés et elle devrait jouer un rôle clé dans l'évolution de l'agriculture chinoise.À l'aide de données désagrégées sur les exploitations agricoles situées dans les provinces chinoises de Hebei et de Shandong, nous avons calculé lesélasticités de substitution d' Allen et de Morishima entre les facteurs de la main-d'oeuvre et de la machinerie. Le calcul de cesélasticités est basé sur des régressions apparemment indépendantes (SUR) et sur la minimisation des moindres carrés en troisétapes (3SLS). Contrairement auxétudes antérieures, nous avons subdivisé la machinerie en trois catégories : grosse, moyenne et petite. Nous avonségalement examiné l'endogénéité de la quantité d'extrants et des prix des intrants. Les résultats de notreétude illustrent clairement la substitution entre la main-d'oeuvre et les trois catégories de machinerie et appuient aussi la substitution entre les trois catégories de machinerie.

Elasticity of Substitution, Price Effect and Sustainable Fertilizer Use: A Translog and SUR Analysis in China

“…Microeconomic production theory shows that demand for production factors is infl uenced by the price of factors themselves and the price of other factors. The degree of response of factor demand to its price change is the price elasticity of demand, which is the ratio between the percentage of change in factor demand and the percentage of change in factor price (McFadden, 1963;Liu et al, 2014): if the demanded quantity of a factor exhibits a large change in response to changes in its price, it is termed elastic, if the demanded quantity of a factor show a small change in response to changes in its price, it is termed inelastic. Given the output level, the degree of response of factor demand to price changes in other input factors is the elasticity of substitution, which is the ratio between the percentage of change in factor demand and the percentage of change in price of other factors (Binswanger, 1974;Clark et al, 2013): if the price of factor A declines and producers are encouraged to increase the input of factor B, then there is a complementary relationship between factors A and B; if the opposite is true, there is a substitution relationship between factors A and B.…”

“…As an important factor in agricultural production, the demand for fertilizer is closely related to the price of fertilizer, labour and machinery faced by farmers in production decisions (Liu et al, 2014;Hu and Yang, 2015;Gao et al, 2018). Considering the following general representative household agricultural production decision-making model:…”

Factor allocation structure and green-biased technological progress in Chinese agriculture

“…It is generally suggested that there is a substitute relationship between labour and fertilisers. When labour is shortage, in order to maintain food production, farmers often tend to add more fertiliser per unit area of soil to make up for the lack of labour input (Liu et al, 2014;Wang et al, 2019), which further induces agricultural technology progress towards the fertiliser-using, aggravating agricultural non-point source pollution (Xiang et al, 2020). On the contrary, increasing the labour capital ratio will promote fertiliser-saving technological progress.…”

“…Particularly under China's current household registration system, rural labourers entering urban employment still maintain arable soil and work part-time in agricultural production activities, which makes it difficult to transfer and concentrate soil and limits the substitution of machinery for labour (Ito, 2010;Li et al, 2017). In order to maintain food production, farmers often tend to add more fertiliser per unit area of soil to make up for the lack of labour input (Liu et al, 2014;Wang et al, 2019), which further induces agricultural technology progress towards the fertiliser-using, aggravating agricultural non-point source pollution (Xiang et al, 2020). At the same time, however, scholars have found that there is a negative correlation between land and fertiliser, with a significant 0.5% reduction in fertiliser and pesticide use for every 1% expansion of land area (Wu et al, 2018).…”

Scenarios of Business Development in the Agricultural Machinery Market Under Conditions of International Trade Integration

“…Economic mechanisms, preconditions, and methodological aspects of business development in the agricultural machinery market under modern economic conditions have been studied in multiple works, including (Bortolini, Cascini, Gamberi, Mora, & Regattieri, 2014a;Huang, Yun, You, & Wu, 2011;Liu Hu, Jetté-Nantel, & Tian, 2014;Staus & Becker, 2012;Yakymenko, 2013;Yu, Leng, & Zhang, 2012;Zhovnovach, 2014). In the agricultural machinery market, machinery and agricultural equipment is bought and sold (Muzlera, 2014).…”