Analysis of total-factor cultivated land efficiency in China's agriculture

Abstract

Along with the rapid economic growth, there has been a booming demand for agricultural products in China, but the increased land usage for the manufacturing sector has caused a decrease in the total cultivated land. Through the data envelopment analysis (DEA) approach, this study first constructs the index of the total-factor cultivated land efficiency (TFCLE) by taking the ratio of the actual cultivated land input to target the cultivated land input. Next, we examine the determinants of inefficiency on the cultivated land use. Based on a province-level panel data over 1997–2006, the empirical estimates indicate that the TFCLE is moderate and fluctuates during the sample period, ranging from 0.601 to 0.713, suggesting room for efficiency improvement in Chinese farmland use. The coastal regions are found to experience a significantly higher degree of the TFCLE compared with non-coastal regions. Overall, there is no significant competition effect brought on by the WTO entry on promoting TFCLE, though this effect differs between the coastal and non-coastal regions. The second-stage regression results show that the natural and artificial disasters, flood, drought, and pollution are the the main causes of inefficiency. Innovative activity and the FDI are evidenced to have a significantly positive relation with the TFCLE in Chinese agriculture. We also find the positive TFCLE-enhancing the effects of production diversification and import competition.