Rigid growth characteristic of demand for oil in China's agro-production
AbstractPurpose – The demand for oil in agricultural production increases continuously with the world oil price soaring, reflecting a rigid growth characteristic, but there are no clear reasons for this. The purpose of this paper is to assess the essential reasons of this issue in theoretical and empirical perspectives. Design/methodology/approach – The paper develops the model of derived demand for petroleum in agro-production; analyzes the effect on agricultural labor-machinery due to the changes in relative price of input factors; and reveals the reasons for the rigid growth of the demand for farm diesel; as well as estimates the substitution of agricultural machine for labor. Findings – The results indicate that the rigid growth characteristic of the demand for farm diesel is due to the adjustment of the product and factor markets; and the most important reason is the changes in structure of the agro-production inputs caused by the relative soaring price of agricultural labor-machinery. Practical implications – The government should attach importance to its impact on farmers and take effective measures to insure the stable development of agricultural production. Originality/value – This research investigates the main reasons for the rigid growth characteristic of demand for oil in China's agro-production from a novelty perspective. The proposed conceptual model is unique, it analyzes the substitution of agricultural mechanical for labor from the perspective of changes in relative price, and selects the two level constant elasticity substitution production functions to estimate the substitution of agricultural machinery for labor.
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Bibliographic InfoArticle provided by Emerald Group Publishing in its journal China Agricultural Economic Review.
Volume (Year): 1 (2009)
Issue (Month): 3 (September)
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Web page: http://www.emeraldinsight.com
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Find related papers by JEL classification:
- O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
- J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
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