The potential of substituting labors with capitals in apple production under the constraint of increasing labor cost

With the development of fruit production in China, the impacts and constraints of increasing labor cost on the apple industry are increasingly significant. Based on a panel data of seven major apple producing provinces from 1998 to 2017, this paper divided apple production factors into machinery, other materials, household labor and hired labor, and applied the method of beyond logarithm production function to quantitatively measure the output elasticity and substitution elasticity of apple production factors. At the same time, this article also analyzed the changes in the quantity and structure of labor force employed in apple industry in China in the past two decades and explored the main causes. Results show that apple production employment has decreased by 27.15% over the past two decades, but the employment structure has changed significantly, and the proportion of hired labors has increased from 2.87% to 28.24%. The output elasticities of other materials and household labors are both 0.32, which are the core factors affecting apple’s production increase. In the context of capitals substituting labors, machinery-household labors and machinery-hired labors generally have a substitution relationship, but the effect of machinery substitution labors is weaker than that of food crops. Other material-household labors have a complementary relationship. Other material-hired labors are in a substitution relationship and the elasticity of substitution is twice that of machinery-hired labors. Based on the above results, this paper suggests that reducing labor costs should further tap the potential of different types of capital to replace labors, the first choice in the short-term is to promote labor-saving cultivation mode by increasing the input of other materials, and in the long-term, by improving the level of mechanization through increasing the input of machinery that matches the above-mentioned mode.