China’s agricultural productivity has experienced sustainable growth largely due to the application of chemical fertilizers since the late 1970s [1
]. Over the period 1978–2017, the gross output value of agriculture in China has increased from 111.8 billion Chinese yuan to more than 5.8 trillion yuan with an average annual growth rate of 4.7 percent at the constant price [4
]. In the context of a mild drop of sown area of grain crops, the total grain output in 2017 reached over 661.6 million tonnes, more than a twofold increase from 1978 [4
]. Besides the institutional and technological changes, it has been well documented that the application of chemical fertilizers has contributed to the growth of agricultural productivity [3
]. China has become the largest consumer of chemical fertilizers worldwide since 1981 [7
]. According to official estimates, the total amount of chemical fertilizers in China’s agriculture has dramatically increased from 8.8 million tonnes in 1978 to 58.6 million tonnes in 2017 (Figure 1
). Fertilizer use intensity has also increased from 58.9 kg per hectare (kg/ha) to 363.5 kg/ha in 2014, followed by a mild decrease to 352.3 kg/ha in 2017 (Figure 1
However, the long-term and high dependency of farmers on chemical fertilizers results in the extensive overuse of chemical fertilizers, which severely threats the sustained development of agriculture in China [3
]. In the economic sense, fertilizer overuse refers to that the actual level of fertilizer use exceeds its optimal level that maximizes agricultural profit [10
]. Much literature has pointed out that farmers in China widely overuse chemical fertilizers to increase crop yield [3
]. For example, the optimal amount of chemical fertilizers for maize production in China was approximately 249 kg/ha, while the actual amount of chemical fertilizers farmers used was 405 kg/ha [10
]. A recent empirical analysis reveals that more than 80 percent of chemical fertilizers applied in rice production in China were overused [3
]. In recent years, a growing body of literature documents the adverse effects of the overuse of chemical fertilizers, including agricultural non-point source pollution, greenhouse gas emission, water eutrophication, and soil salinization [11
]. Hence, the sustained development of agriculture in China is facing grave challenges due to the overuse of chemical fertilizers.
While per capita rural income has increased by a large margin over the past four decades, the urban-rural income gap has also expanded. Due to the rural reform since the late 1970s, the urban-rural income ratio measured at the constant price shrank from 3.2 in 1978 to 1.9 in 1985 (Figure 2
). In contrast, the continuous expansion of the urban-rural income gap since the late 1980s has caused social concerns [13
]. In 2009, the urban-rural income ratio climbed to 3.1, which was the peak value over the past four decades (Figure 2
). While the urban-rural income ratio has slightly fallen in recent years, it remained at 2.7 in 2017 (Figure 2
). It has been repeatedly pointed out that the widening urban-rural income gap has been gravely challenging the sustained rural as well as overall economic development in China [14
Both the urban-rural income gap and environmental degradation arising from excessive fertilizer use are detrimental to the sustainable development of agriculture and rural areas in China. In the context of deepening supply-side structural reform in agriculture and implementing the rural revitalization strategy, it is crucial to reduce fertilizer use to improve environmental quality and narrow the urban-rural income gap in China. Indeed, recent years have witnessed an increasing number of studies investigating the driving forces for fertilizer use as well as the effect of income inequality or gap on environmental degradation [3
Note that the literature about the effect of income inequality on environmental degradation was extended from the so-called environmental Kuznets curve (EKC) hypothesis which describes a potential relationship between economic growth and the environment [20
]. Many studies aimed to empirically examine the EKC hypothesis, but their conclusions are conflicting [21
]. A group of empirical studies confirmed that an inverted U-shaped relationship exists between environmental degradation and per capita gross domestic product (GDP) or income. Using a cross-national panel dataset from the Global Environment Monitoring System, Seldon and Song concluded that per capita emission of suspended particulate materials, sulfur dioxide (SO2
), nitrogen oxide, and carbon monoxide showed a significant inverted U-shaped relationship with per capita GDP [23
]. Jalil and Mahmud observed an inverted U-shaped relationship between per capita real GDP and CO2
emission using a time series dataset of China from 1975 to 2005 [24
]. Similarly, Riti et al. also supported the EKC hypothesis in China by applying different estimation techniques based on the annual time series data over the period 1970–2015 [25
However, some studies questioned the validity of the EKC hypothesis. For example, using the data of 23 countries during the period 1974–1989, Kaufmann et al. found that the concentration of SO2
falls as per capita GDP grows between 3000 to 12,500 United States dollars (USD), and then rises as per capita GDP rises beyond 12,500 USD [26
]. Dinda et al. argued that per capita real GDP shows an explicitly negative and U-shaped relationship with the concentration of SO2
and SPM, respectively, using the city-wise annual data for 33 countries during the three periods 1979–1982, 1983–1986, and 1987–1990 [27
]. Recently, an empirical work conducted by Lin et al. re-examined the environment-income relationship in terms of CO2
emission in five African countries, and denied the EKC hypothesis [28
A considerable number of studies extended the EKC hypothesis to examine the relationship between income inequality and environmental degradation [18
]. The pioneering work was conducted by Boyce who hypothesized that growing income inequality may increase the rate of environmental time preference of both the rich and poor, leading the two groups to take environmentally-damaging actions, and thus, the growing income inequality may induce environmental degradation by encouraging the rich to transfer the environmental costs to the poor [29
]. Afterward, Torras and Boyce utilized the pooled ordinary least squares method to analyze the impact of inequality on air and water pollution but obtained contrasting results [30
]. Using a cross-national dataset in terms of environmental degradation in 1985, Heerink et al. argued that higher inequality may reduce environmental degradation [31
], which is contrary to the conclusion of Boyce [29
]. Zhang and Zhao used the national and regional panel data from 1995 to 2010 in China to reveal that more equitable income distribution is useful for controlling CO2
]. Using a provincial panel dataset from 1995 to 2012 in China, Hao et al. argued that CO2
emissions per capita increase as the income gap expands [33
]. In the case of the United States, Jorgenson et al. showed that the state-level CO2
emissions are positively associated with the income share of the top 10 percent based on the data over the period 1997–2012 [19
]. Using a panel dataset of 158 countries from 1980 to 2008, Grunewald et al. argued that for low and middle-income countries, higher income inequality is associated with lower CO2
emissions, while in upper-middle-income and high-income economies, higher income inequality increases per capita CO2
The previous studies have shed light on the relationship between environmental degradation and economic development. However, the conclusions are not consistent. Moreover, the relationship between the urban-rural income gap and environmental degradation, especially the environmental issues involving agriculture, attracts little attention. For example, little is known about the relationship between urban-rural income gap and fertilizer use, especially in China, the largest user of chemical fertilizers worldwide. Overall, the following three questions remain unanswered. First, does the relationship between fertilizer use and per capita rural income accord with the EKC hypothesis? Second, does fertilizer use respond to the change of the urban-rural income gap? Third, does there exist an interactive effect of per capita rural income and urban-rural income gap on fertilizer use? The motivation of this study is to answer the three questions in the case of China. For this purpose, a panel dataset covering 25 provincial-level administrative regions (hereafter referred to as “provinces”) over the period 1995–2017 was collected. The system Generalized Methods of Moments (GMM) was utilized to address the endogeneity issue of the dynamic panel-data model that describes the relationship between urban-rural income gap and fertilizer use intensity.
The novelty of this study to the literature is reflected in three aspects. First, this study enriches the literature regarding the EKC hypothesis by shedding light on the relationship between urban-rural income gap and fertilizer use intensity. Indeed, much literature attaches attention to the empirical studies on the EKC hypothesis for the impact of income inequality, rather than urban-rural income gap, on air and water pollutants, and deforestation [17
]. However, little empirical evidence has been provided for the relationship between urban-rural income gap and agrochemical inputs in agricultural production, especially in the context of China. Second, note that the urban-rural income gap and excessive fertilizer use co-exist in many other developed and developing countries, and thus, the results of this study could have important implications for not only China but also for other countries regarding narrowing the urban-rural income gap and mitigating agricultural non-point source pollution by reducing fertilizer use. Third, the ordinary least squares method and the fixed-effects model were two widely used econometric techniques in the early previous studies, but these models ignore the endogeneity issue of income inequality [26
]. In particular, the potential state dependence of environmental pollutants still remains neglected, though increasing attention has been attached to the endogeneity issue in recent years [28
]. In this study, the adoption of the dynamic panel-data model and system GMM could capture the potential state dependence of fertilizer use, solve the potential endogeneity issue, and improve the estimation efficiency.
The remainder of this study is structured as follows. Section 2
constructs a theoretical framework to analyze the relationship between the urban-rural income gap and fertilizer use intensity, which provide a basis for the empirical analysis in this study. In Section 3
, we first underline the path of empirical analysis, and then accordingly develop the econometric model. Meanwhile, the dependent and independent variables are defined, and the data source for the empirical analysis is described. The main results and robustness check are reported and discussed in Section 4
. The final section concludes with some policy implications.
2. Theoretical Analysis
The previous literature has constructed some theoretical frameworks regarding the relationship between the income gap and environmental pollution [34
]. However, the previous theoretical analysis is far from enough to reveal how fertilizer use intensity in agriculture would be associated with the urban-rural income gap. Hence, this study attempts to construct a theoretical framework to discuss the impact of the urban-rural income gap on fertilizer use intensity. The fundamental assumption in this study is that in the context of the urban-rural income gap, the relatively poorer rural households would endeavor to increase their income to narrow the income gap with urban households. The larger the urban-rural income gap is, the stronger the desire rural households have to increase their income.
Given the large urban-rural income gap, rural households could increase their income through agricultural productivity growth, in which fertilizer use plays a crucial role. The income components in China have experienced an impressive evolution since the reform and opening-up. Overall, while the percentage of non-agricultural income in per capita rural income ranged from 22.4 percent in 1995 to 40.9 percent in 2017, the percentage of business income remained at 37.4 percent in 2017 [4
]. Note that agricultural business is the main source of rural households’ business income [38
]. It illustrates that agricultural production still plays an important role in rural income growth [39
]. When the urban-rural income gap becomes larger, rural households could increase fertilizer use to achieve high agricultural productivity to promote income growth [38
The large urban-rural income gap could stimulate the rural labor force to seek for non-agricultural work in the urban areas for higher labor income, and thus, fertilizer use becomes a widely adopted measure to cover the shortage of agricultural labor force [41
]. Since the early 1980s, the universal implementation of the household responsibility system has contributed to the rapid growth of agricultural productivity and correspondingly resulted in a large number of surplus rural labor force [42
]. Over the past four decades, massive numbers of young rural laborers with relatively better health and education have been migrating to urban areas to pursue high non-agricultural income in the context of the large urban-rural income gap [44
], which to some extent causes a shortage of the agricultural labor force [43
]. To cover the shortage of the agricultural labor force, rural households would be much more likely to increase fertilizer use in agriculture [42
In the context, it is reasonable to hypothesize that a larger urban-rural income gap would induce rural households to apply more fertilizers in agriculture.
5. Conclusions and Policy Implications
A large urban-rural income gap and excessive fertilizer use have challenged the sustainable development of agriculture and rural areas in China. In recent years, China’s government has been determined to narrow the urban-rural income gap and reduce fertilizer use. However, it was unclear whether there is a link between the urban-rural income gap and fertilizer use. This study aimed to investigate the relationship of the urban-rural income gap and fertilizer use intensity based on panel data covering 25 provinces in China over the period 1995–2017.
The estimation results of the system GMM show that the expansion of the urban-rural income gap would significantly increase fertilizer use intensity, which does not depend on per capita rural income. There is an inverted U-shaped relationship between per capita rural income and fertilizer use intensity, which supports the EKC hypothesis. However, the estimated peak turning point of per capita rural income is much higher than the actual level of all provinces in 2017, implying that fertilizer use intensity would further increase as per capita rural income grows in certain years. In addition, fertilizer use could also be regarded as a response to the change of agricultural products price and total sown area, and technological development.
The findings in this study have some significant implications for China as follows:
First, China’s government is expected to take practical measures to increase per capita rural income so as to narrow the urban-rural income gap. Our results demonstrate that narrowing the urban-rural income gap and reducing fertilizer use in China are compatible long-term aims. Although fertilizer use intensity would probably increase as per capita rural income grows over a certain period of time, it is better to consider these issues from a forward-looking perspective. In the short term, there would be a trade-off between the growth of per capita rural income and reduction of fertilizer use intensity, since the per capita rural income of all provinces remains at the left side of the inverted U-shaped curve. However, it is fundamental to stride across the peak turning point of per capita rural income to reduce fertilizer use intensity. More importantly, the narrowing urban-rural income gap would also significantly hinder the increase in and even promote the reduction of fertilizer use intensity.
Second, agricultural research and development (R&D) and extension should be encouraged to provide a firm foundation for reducing fertilizer use intensity. The findings in this study show that the estimated coefficient of time trend term used to measure agricultural technological progress is negative, implying that fertilizer use intensity would significantly decrease with the progress of agricultural technology. Hence, enhancing the R&D and extension of agricultural fertilization technology would be greatly conducive to the reduction of fertilizer use intensity. Some previous studies reveal that while agricultural R&D and extension have made a great contribution to agricultural production in China, some problems remain to be solved [65
]. China’s government should deepen the reform of agricultural R&D and extension systems to meet the urgent need for the sustainable development of agriculture.
Third, it is reasonable to promote the conversion of cultivated land and appropriately scaled-up agricultural business. The findings in this study show that fertilizer use intensity would significantly decrease as the provincial-level total sown area expands. In fact, some previous studies also reveal that a negative relationship exists between farm size and fertilizer use intensity [54
], which means that farm size has a scale effect on fertilizer use. Meanwhile, it should be noted that agricultural production in China has been being challenged by extensive rural-urban migration of the rural labor force, aging of the agricultural labor force, and small-scale farming systems. Hence, it is crucial for China to encourage and promote the conversion of cultivated land in a reasonable and orderly pattern and appropriately scaled-up agricultural business, which would further promote the reduction of fertilizer use intensity.
This study has several limitations. First, the study failed to examine the impact mechanism of the urban-rural income gap on fertilizer use intensity at the micro-level, which implies a great room for improvement in the future. Second, this study did not further investigate the impact of the urban-rural income gap on fertilizer use in the production of specific crops due to data availability. These two aspects are the research directions for further investigation about the relationship between the urban-rural income gap and fertilizer use intensity in agriculture.