Performance evaluation of resource utilization with environmental externality: Evidence from Chinese agriculture

Agriculture is of crucial importance to the food security of each country. As the most populous country, China has to pay more attention to agriculture to ensure enough agricultural production. Most research focuses on efficiency or productivity change in agriculture, while capacity utilization and environmental externality may often be ignored. Based on the measurement of plant capacity utilization (PCU), this study investigated Chinese agriculture during the period 1997–2018. We extended the PCU model with undesirable outputs to a novel input- and output-oriented long-run PCU measurement with by-product technology. The novelty lies in the introduction of an environmental PCU measure to capture the possible capacity of economic growth and pollution control. The empirical result shows a significant disparity in capacity utilization in agriculture among provinces. For instance, the central provinces have the highest level of PCU, followed by the eastern region, and the western region performed worst. Furthermore, possible policy implications are derived to promote agricultural production with environmental restrictions.