Analyzing inter-factor substitution and technical progress in the Chinese agricultural sector

• We employ a trans-log production function model for China’s agricultural sector.
• The output elasticity of labor is the largest, followed by capital and energy.
• Capital, labor and energy are substitutes for each other, but the elasticity of substitution between capital and energy is the highest.
• The relative difference in technical progress among these factors is insignificant.
• We suggest increasing technological innovation and allocating more capital into the agricultural sector.

In this paper, we employ a trans-log production function model for China’s agricultural sector, with capital, labor and energy as input factors. The output elasticity, substitution elasticity and relative difference in technical progress among the factors are analyzed. The results show that during the period 1980–2012 the growth of the agricultural economy in China benefited from the combined effects of factors accumulation and technical progress. Among the factors, the output elasticity of labor is the largest, followed by capital and energy. Capital, labor and energy are substitutes for one another, but the elasticity of substitution between capital and energy is the highest, with a value of 1.1. In the meantime, the relative difference in technical progress among these factors is insignificant and there is a convergence trend over time. We suggest increasing technological innovation in order to improve the contribution of technology progress as well as allocating more capital into the agricultural sector in order to alleviate the shortage of energy supply and the current problem of “hollow” in the rural labor force. This is of great significance to reducing energy consumption and improving the total factor productivity in the China’s agricultural sector.