How Do Rising Farmland Costs Affect Fertilizer Use Efficiency? Evidence from Gansu and Jiangsu, China

Abstract

As the farmland transfer market in China develops, moderate-scale operations increasingly grow but without much improvement in fertilizer use efficiency. This study theoretically analyzes the mechanism and effect of rising farmland costs on fertilizer use efficiency using multiple quadratic regression and mediating effects models. It empirically tests a micro-sample of 806 farmers in Gansu and Jiangsu provinces in China from two dimensions: the full samples and farmer heterogeneity. The results showed 0.544 as the average fertilizer use efficiency (hereinafter, fe) of farmers in Gansu and Jiangsu, highlighting the severe loss of fe caused by excessive fertilizer inputs. The multiple quadratic regression model further revealed an inverted U-shaped relationship between farmland costs and fe, with the U-shaped curve showing a remarkable inflection point at the USD 708/mu mark. When farmland costs are excessive (cost > CNY 708/mu), the increase in farmland costs inhibits the fe. An investigation of the corresponding impact mechanism for this scenario (i.e., cost > USD 708/mu) revealed that farmland costs directly suppress fe (−0.485) by distorting the fertilizer factor substitution effect and indirectly suppress fe (−0.037) by impeding the technology spillover effect of production specialization and production scale-up. We also found heterogeneity between two groups: ordinary farmers and new agricultural operators (e.g., large grain and family farmers), with the peak kernel density function of fe of new agricultural operators (0.85) being much higher than that of ordinary farmers (0.30). Moreover, the multiple quadratic regression between the groups revealed a lower inflection point for ordinary farmers (CNY 638/mu) than new agricultural operators (CNY 823/mu), highlighting that the fe of ordinary farmers was more likely to be inhibited by the excessive rise in farmland costs. To promote the sustainable development of China’s agricultural production, we propose reducing the cost of farmland, promoting service-scale operations, and fostering new agricultural operators.