Will the substitution of capital for labor aggravate the input of chemical fertilizer in agriculture? Analysis based on provincial panel data in China

Abstract

Major changes have taken place in the structure of agricultural input factors in China, which will inevitably affect fertilizer input in agriculture. However, there is no consistent conclusion on the impact of capital and labor input on chemical fertilizer input. This paper applies directed acyclic graphs (DAGs) to clarify the backdoor path of capital and labor affecting fertilizer input. Using inter-provincial panel data, the dynamic panel system GMM method was adopted to examine the mechanism of factor substitution elasticity in determining the impact of agricultural capital-labor input on chemical fertilizer input. Results showed that agricultural labor and capital input are positively correlated with chemical fertilizer input, and the factor substitution elasticity has a negative regulatory effect in the progress of labor and capital input impact fertilizer input. From 1996 to 2018, the trend of capital replacing labor was obvious, and the growth ratio of capital input was much greater than the decrease ratio of labor input. Therefore, the increase in capital input and its substitution for labor is the main driver of the increase in fertilizer input. Meanwhile, the fertilizer-capital substitution elasticity decreased during the period 1996–2018, thus reinforcing the rise in fertilizer input caused by the increase in capital input. To reduce the agricultural pollution caused by the increase in chemical fertilizer input, it is very important to reverse the declining trend of fertilizer-capital substitution elasticity.