LAUSR

Green growth has become a new direction for Chinese economic development in the 21st century. Indeed, sustainable agricultural development is particularly important in China due to limits on resources and the presence of the largest population in the world. In this paper, we propose a novel decomposition of the overall inefficiency into three components of technical, mix, and scale effects at aggregate level by allowing for desirable and undesirable outputs in a non-parametric framework. We empirically investigate economic and environmental performance associated with resource misallocation (represented by input/output mix) in Chinese agricultural sector across the 31 provinces over the period 1997–2014. Our results show that average overall inefficiency in Chinese agricultural sector is 9.13% during the sample period, which suggests there exists a 7.94% possible improvement for gross output value and 1.19% potential reduction for carbon emission. Moreover, we find inefficiency is mainly due to the mix effect that requires an improvement in reallocation of inputs and this may be related to the ongoing supply side structural reforms in China. We also present a dual model of by-production technology for shadow price analysis and report upward trended carbon abatement costs in Chinese agriculture.