Environmental Indices for the Chinese Grain Sector
Ming Chen, Larry Karp
Chinese agriculture,dynamic production,environmental indices,sustainability,Kalman filter
Climate Change and Sustainable Development
Increased population pressure and political decisions have led to more intensive agricultural practices in China. As in other regions of the world, these practices can damage natural capital. We use the Kalman filter and Chinese panel data to estimate an index of environmental productivity (natural capital), together with the parameters of environmental dynamics and the production function. These estimates show that intensive practices are likely to have had persistent, substantial, and statistically significant negative effects on productivity. Ignoring these effects can cause substantial misallocation of resources. The results illustrate the possibility of estimating sectoral environmental indices using data commonly available.