Does Fertilizer Use Intensity Respond to the Urban-Rural Income Gap? Evidence from a Dynamic Panel-Data Analysis in China

This study aims to investigate the impact of the urban-rural income gap on fertilizer use intensity in China. A theoretical analysis of the relationship among per capita rural income, the urban-rural income gap, and fertilizer use intensity is developed, which is similar to the environmental Kuznets curve hypothesis. Both the Theil index and urban-rural income ratio are employed to measure the urban-rural income gap using a provincial-level panel dataset covering 25 provincial-level administrative regions over the period 1995-2017. The estimation results of the system Generalized Method of Moments show that the expansion of the urban-rural income gap significantly increases fertilizer use intensity. While an inverted U-shaped relationship exists between fertilizer use intensity and per capita rural income, the peak turning point is much higher than the actual per capita rural income of all provinces in China. This demonstrates that fertilizer use intensity would further increase with the growth of rural income over a period of time. In addition, a lower growth rate of the agricultural product price, larger total sown size, and technological progress are likely to reduce fertilizer use intensity. This study has several important policy implications for promoting the sustainable development of agriculture and rural areas in China. Specifically, efforts must be made to narrow the urban-rural income gap, encourage agricultural research and extension, and promote land conversion and appropriately scaled-up agricultural business.