Spatial Spillovers and Green Growth: Decoding Environment‐Adjusted Agricultural Productivity Dynamics

ABSTRACT This paper develops a novel production function framework that accounts for spatial spillovers in environment‐adjusted agricultural productivity and its components, namely technical change, scale efficiency change and environmental efficiency change, in a single‐stage setting, with greenhouse gas (GHG) emissions incorporated as an undesirable output. A parametric frontier model was specified to measure agricultural environmental efficiency and productivity growth, while allowing for the agricultural outputs to be functions of individuals’ and neighbors’ characteristics. The empirical application concerned the 126 prefectures in the Yangtze River Basin for the period 2000–2020. The empirical findings indicated an upward trend, with an average environment‐adjusted agricultural productivity growth rate of 0.213 during this period when spatial spillovers and agricultural undesirable output were considered, suggesting that agricultural productivity was increasing rapidly and at an accelerating pace. The downstream region experienced the highest rate of productivity improvement, followed by the midstream region, while the upstream region lagged. Technical progress emerged as the dominant driver of environment‐adjusted agricultural productivity growth in the study area.