Simultaneous Decisions to Undertake Off-Farm Work and Straw Return: The Role of Cognitive Ability

Abstract

Using a sample of 1166 maize-planting farmers from Liaoning province in China, in this paper, we provide a new explanation for the slow-proliferation situation of straw return. Both our theoretical and empirical results indicate that the low rate of adoption of straw return can be partly attributed to the farmers’ choice to undertake off-farm work. Probit, PSM, IV-probit, and bivariate probit models are utilized to estimate the interdependent nature of these two simultaneous decisions, with an identified causal effect ranging from −0.115 to −0.287. Instead of the “income-increasing effect”, our research supports the dominant existence of the “lost-labor effect”. Furthermore, intelligent and risk-tolerant farmers undertaking off-farm work are found to have additional negative impacts on the likelihood of straw return adoption. With regard to the mediating mechanisms, we find that the choice of off-farm work may decrease the probability of raising cattle and also downscale arable land, thereby reducing the likelihood of straw return adoption. In line with our proposed model, fluid cognitive ability contributes to the farmers’ adoption of straw return by increasing their learning and updating efficiency. In contrast, crystal cognitive ability deters the undertaking of nonfarm work by establishing a comparative advantage in agricultural production, thus indirectly promoting the proliferation of straw incorporation. According to our theoretical and empirical findings, the proper policy interventions proposed mainly include three points. First, governments should endeavor to increase agricultural specialization by further promoting arable land transfer and human capital accumulation in farming. Second, it is beneficial to facilitate the process of learning by doing and social learning by enhancing the human capital levels of farmers. Last, it is necessary to cultivate farmers’ inclination towards long-term investment by explaining the concrete benefits of straw return to farmers on a timely basis.