Impact of Economic Development Level and Agricultural Water Use on Agricultural Production Scale in China

Abstract

The change of agricultural production scale is directly related to food security and the stable development of social economy. Particularly, the influence of economic development level and agricultural water use on agricultural production scale cannot be ignored. Therefore, this paper uses the fully modified ordinary least squares (FMOLS) and the Dumitrescu–Hurlin panel causality test models to discuss the effects of the level of economic development, agricultural water use, the level of urbanization, and the market price of agricultural products on the scale of agricultural production in China. The analysis results indicated that agricultural water use, the level of urbanization, and the market price of agricultural products promoted an increase of the scale of agricultural production at the total sample level; a 1% increase for these three variables will result in an increase of the scale of agricultural production of 0.634%, 0.377%, and 0.292%, respectively. The influence of economic development level on agricultural production scale accords with Kuznets curve. However, at the regional level, the influence of each variable on the eastern region is consistent with the trend of the total sample. In the central region, the impact of economic development on agricultural production scale shows a U-shaped curve, and the improvement of urbanization level inhibits the expansion of agricultural production scale. In the western region, all variables failed to pass the significance test. The results of the FMOLS model were validated by the fixed effects model. The results of causality tests showed that bidirectional causality existed between the scale of agricultural production and the level of economic development, the scale of agricultural production and agricultural water use, the level of economic development and the market price of agricultural products, and the level of urbanization and the market price of agricultural products. In different regions, there were differences in causality between variables. Therefore, based on the empirical results, we put forward some policy suggestions to maintain the scale of agricultural production.