Can agricultural subsidy reform promote reduction of fertiliser nonpoint source pollution? Evidence from China

Abstract

The substantial increase in grain production stimulated by traditional agricultural direct subsidies has been accompanied by a concomitant decrease in ecological quality, precipitated by excessive application of chemical fertilisers, which has generated countervailing effects that fundamentally undermine the positive effect of subsidy policies on agricultural output. Consequently, the mitigation of agricultural pollution and the elevation of ecological quality have emerged as pivotal directions for the reform of agricultural subsidies. Using both time-varying difference-in-differences (DID) models and spatial DID models in this study, we examined the effect of agricultural 'three subsidies' reform on agricultural fertiliser nonpoint source pollution (AFNSP), drawing on China's province-sector panel data from 2008 to 2022. The empirical evidence yields several salient findings. First, the three subsidies reform can significantly reduce AFNSP and improve ecological quality. Second, the largescale operation of agricultural households and the enhancement of agricultural production efficiency serve as effective pathways for the three subsidies reform to reduce AFNSP. Third, the implementation of the three subsidies reform engenders significant spatial spillover effects, which play a crucial role in reducing overall regional AFNSP. Fourth, the efficacy of the three subsidies reform exhibits heterogeneity across diverse agroecological contexts and farming cultures. Last, the reform has resulted in notable improvements in agricultural ecological quality, thereby reinforcing food security capabilities. These findings not only offer valuable reference for refining agricultural subsidy reform but also contribute to the development of a comprehensive framework that simultaneously safeguards agroecological security and food security.