Scale of Operation, Financial Support, and Agricultural Green Total Factor Productivity: Evidence from China

Abstract

Large-scale agricultural operations number among the ways to promote the green development of the agricultural sector, which can not only encourage farmers to adopt green innovative technology, reduce the input of chemical fertilizers and pesticides, and achieve environmental protection, but it also enables production with a high efficiency through an economy of scale and an improvement in farmers’ income. Based on the agricultural panel data of 30 provincial administrative regions in China from 2000 to 2019, the panel autoregressive distribution lag model was used to explore the dynamic relationship between a business’ scale, financial support, and agricultural green total factor productivity (AGTFP). The empirical outcomes indicate that there is a significant cross-sectional dependence, cointegration relationship, and long-run relationship between the scale of agricultural operations, financial support for agriculture, and AGTFP. Strengthening the intensity of financial support for agriculture is not conducive to improving AGTFP. On the contrary, increasing the scale of agricultural operations could promote AGTFP. In addition, the panel Granger causality test results indicate that financial support for agriculture has a unidirectional causal relationship with the scale of agricultural operations and AGTFP. The impulse response results demonstrate that reducing part of the financial support for agriculture or increasing the scale of operation can promote AGTFP. These conclusions have a long-term practical significance for agricultural departments and decision-making regarding financial distribution.