Measuring and decomposing TFP incorporating environmental components: applications for rice farmers in Hubei Province, China

This study is aimed at assessing agricultural and environmental performance and analyzing whether observable productivity changes stem from technologically induced or environmentally induced components. Based on individual farm household data from Hubei Province covering the period 2004 to 2010, we decompose total factor productivity (TFP) into technical efficiency change (TEC), technical change (TC), scale effect (SE), and the environmentally related allocative effect (AE) as a means of evaluating environmental performance. The empirical results indicate that the average TFP decrease rate is 2.8%, which reflects the comprehensive outcome of all relevant components. Regarding direct pollution-related inputs (fertilizer and land), improving nitrogen (N) fertilizer application efficiency and land use efficiency can contribute not only to less cropland expansion and greater productivity growth but also to N loss reduction and N pollution abatement in the short and long term. Concerning indirect pollution-related inputs (labor, intermediate input, etc.), although increases in quasi-fixed inputs (labor and intermediate input) can lead to both N and productivity growth, the magnitude of the positive effects of quasi-fixed inputs on productivity cannot offset the negative effect of fertilizer on productivity; thus, more scientific and economical fertilizer application is the key to improving agricultural productivity and benefiting the environment and the ecosystem.</p