2016 Volume 13 Issue 2 Pages 1-24
The purpose of this study is to measure the environmental efficiency, waste price, and over-employment in China’s soybean farming sector. We establish that there is a relationship between estimated environmental efficiency and the two independent variables, rural per-capita income and waste price, which indicates if the effect of rural development and waste levels on environmental efficiency may be observed at a provincial level in this sector. This study relies heavily on the Compilation of National Farm Product Cost-Benefit Data as well as the Cob-Douglas production function developed by Egaitsu and Shigeno (E-S), which allows us to distinguish between biochemical (BC) technology and mechanical (M) technology. For the estimation, we apply the stochastic frontier model to Greene’s (2005) panel data. Based on our environmental efficiency estimation, we conclude that the industry has been inefficient since 2000; however, it has since generally improved (with regional variations) due largely to technological advances. Additionally, we find that the waste price has increased since the late 2000s and that the rate of over-employment exceeded 50% in the majority of the provinces. Technical efficiency and cost efficiency have not grown as rapidly in the M process as they have in the BC process. In order to improve these efficiencies within the M process, policies that promote the transfer of labor and increase capital intensity in the farming sector should be enacted. Furthermore, Both the technical efficiency and environmental efficiency of the system GMM reveal that the estimated parameters of log( rural per-capita) are significantly positive and those of log (rural per-capita) squared and waste price are significantly negative. According to our empirical results, both BC and M production factors have been used inefficiently in China’s soybean farming sector. The pollution and low income in rural areas is a direct result of the excessive use of production factors. Clearly, institutions and policies that distort the production factor market are needed to remedy this situation.
