Rising labor prices, input substitution, and input structure changes: Evidence from soybean production in China

In order to analyze input structure changes of non-three staple grains under the background of rising labor prices, based on the data of input prices and quantities of soybean production from 1991 to 2018 and applying the trans-logarithmic cost function, this paper estimated the production cost share equation of China’s soybean and calculated the demand elasticity and substitution relationship of inputs. Results show that: in China’s soybean production, the demand elasticities for labor and fertilizer are inelastic, and the demand elasticity for machinery is flexible with a weakening trend. There is a pair-wise substitution relationship among machinery, fertilizer, and labor, of which the substitution relationship between machinery and labor is the strongest, and the substitution relationship between fertilizer and labor is the weakest. In addition, the substitution relationship between machinery and labor has a downward trend, and the substitution relationship between chemical fertilizer and labor has an upward trend. Therefore, this paper suggests to optimize the input structure of soybean production in China through the following methods: 1) further promoting the adoption of soybean production machinery technology through agricultural machinery purchase subsidies to reduce soybean production costs; 2) combining land use and land maintenance together, coordinating crop rotation and crop structure adjustment, and strengthening research and extension service of soybean production machinery technology; and 3) taking into account the utilization efficiency of chemical fertilizer and ecological benefits, optimizing the types of fertilizers, applying biological and physical methods to replace some chemical fertilizers, and promoting the commercial services of fertilizer application.