Do agricultural services contribute to cost saving? Evidence from Chinese rice farmers

Abstract

Purpose

The purpose of this paper is to clarify agricultural services into five categories, including agricultural materials supply service, financial service, technical service, machinery service and processing and sales service, and to examine the effect of agricultural services on cost saving of rice production in China.

Design/methodology/approach

Based on a three-year panel data set covering 3,421 rice farmers in 12 Chinese provinces collected from the state rice industry experiment stations’ fixed watch points of China Agriculture Research System, a stochastic frontier model which takes the price vectors of input variables into cost function is developed by stochastic frontier analysis method in the study.

Findings

There is a deviation between the actual cost and the minimum cost on rice production in China due to the loss of cost efficiency, whose score is 0.7983 at the mean. Agricultural services can help improve cost efficiency, thus contributing to cost saving. Specifically, the effect of technical service on cost saving is the highest, followed by processing and sales service, machinery service, financial service and agricultural materials supply service.

Originality/value

The results of this paper are of great significance to the effectiveness and efficiency of the targeted agricultural services and indicate implications for policy improvement under the context of clear upward trend of agricultural production costs.

Citation

Tang, L., Liu, Q., Yang, W. and Wang, J. (2018), "Do agricultural services contribute to cost saving? Evidence from Chinese rice farmers", China Agricultural Economic Review, Vol. 10 No. 2, pp. 323-337. https://doi.org/10.1108/CAER-06-2016-0082