Leveraging agricultural production organizations to reduce fertilizer use: Evidence from China

Abstract

Smallholder-dominated agriculture in China faces severe fertilizer overuse due to fragmented land, limited mechanization, and low adoption of advanced agricultural technologies. Agricultural production organizations (e.g., family farms, agricultural cooperatives, and agricultural enterprises), characterized by their relatively large scale and advanced agricultural practices, are considered potential solutions for promoting more sustainable practices. This study investigates whether and how different agricultural production organization forms are associated with fertilizer use in China. Linking detailed business registry data with county-level panel data, we find that agricultural enterprises and cooperatives are associated with reductions in fertilizer use at the county level, while family farms do not show a significant relationship. Agricultural mechanization and land consolidation are potential channels through which agricultural enterprises and cooperatives are linked to these reductions. Further analysis with household survey data suggests associations between these two types of organizations and reductions in smallholders’ fertilizer inputs through agricultural services. Heterogeneity analysis indicates that agricultural enterprises have a more pronounced effect in areas with extensive land transfer, advanced fertilization techniques, and in the eastern and plain regions of China. Agricultural cooperatives, benefiting from their unique governance structure, consistently show negative associations with fertilizer use regardless of land transfer, fertilization techniques, and topography constraints. Our findings provide insights into pathways for transitioning smallholder farming toward sustainable agriculture.