Exploratory Research on Overfertilization in Grain Production and Its Relationship with Financial Factors: Evidence from China

Abstract

Although there have been many studies on the degree of overfertilization, there are few systematic comparative analyses on the degree of overfertilization of three major grain crops (wheat, rice, and maize) over a long time span in recent years. Whereas the studies of the influence of government efforts, individual characteristics of farmers, and economic factors on farmer’s fertilization decision ignored the financial consideration of farmers. This study aims to systematically investigate the degree of overfertilization in the production of three major grain crops in 21 provinces of China from 2004 to 2018 by developing a panel-data model, and explores the impact of financial factors on overfertilization by applying Arellano-Bover/Blundell-Bond linear dynamic panel-data estimation. The results showed an upward trend in overfertilization in the production of three grain crops from 2010 to 2018, although a decline between 2007 and 2009 may indicate that the financial crisis had a short-term impact on overfertilization. Overfertilization varied across regions, and chemical fertilizers were applied most excessively in wheat production in the Huang-Huai-Hai region and in maize in Southwest China. The analysis of financial factors showed that cash earnings from wheat and maize positively affected overfertilization, whereas cash cost and farmers’ income had opposite effects. In fact, farmers value cash earnings and cash costs rather than the time value of money. In addition, the sensitivity and cautiousness of farmers regarding economic events may indicate that farmers have a certain degree of economic rationality regarding fertilizer input in several provinces, such as Anhui and Yunnan. The study provides necessary supplements to existing research on the influence factors of overfertilization and has implications for improving the design of fertilizer sales collection methods by the government and the financial service sector.