Agricultural Subsidy Policies and Sustainable Development in China: The Effect of Agricultural Subsidies on Farmers' Chemical Fertilizer Application

ABSTRACT Using 2013–2020 China Rural Microeconomic Data, we employ the staggered difference‐in‐differences method to examine the effects of agricultural subsidy reform on farmers' chemical fertilizer (CF) application intensity. We find that the reform significantly reduces CF application intensity: farmers in reformed provinces apply 14.2% less CF than those in non‐reformed provinces. The effect is more pronounced among elderly farmers, low education groups, high‐income groups, and agriculture‐dependent households. Three main channels underlie these effects: first, the provision of greater subsidy incentives to large‐scale farmers; second, the substitution of CF with agricultural machinery; and third, the promotion of organic fertilizer as a substitute for CF. Therefore, designing agricultural subsidy policies that target large‐scale farmers and incentivize green production practices may be an effective way to balance grain production with environmental protection.