Lijia Jiang, Lei Huang
Objective To assess the dual effects of agricultural input subsidies on soil health and farmer livelihoods in China, identify the mechanisms through which subsidies operate, and compare effect heterogeneity across regions and policy periods. Methods Using provincial panel data from 30 Chinese provinces over 2010–2023, two-way fixed effects models were employed to estimate subsidy impacts on fertilizer application intensity and rural household income. Mediation analysis identified three transmission pathways: fertilizer use efficiency, agricultural mechanization, and land operation scale. Heterogeneity was examined through subgroup regressions and Chow tests comparing major grain-producing areas (MGPAs) versus non-major areas, and pre- versus post-reform periods. Results Subsidy density was significantly associated with reduced fertilizer application intensity and increased farmer income, suggesting that these dual objectives are not mutually exclusive. Fertilizer use efficiency mediated 26.2% of the subsidy-fertilizer reduction relationship, while mechanization and land scale jointly accounted for 33.3% of the income growth effect. Heterogeneity analysis revealed substantially stronger subsidy effects in MGPAs compared to non-major areas. Following the 2016 subsidy reform, the fertilizer reduction effect increased markedly from non-significant to highly significant, whereas income effects remained stable. Conclusion Linking subsidies to farmland fertility protection is associated with reduced fertilizer application intensity—a macro-level proxy for soil health—alongside sustained income growth, suggesting a potential synergy between environmental and livelihood objectives. Policy recommendations include further developing performance-based subsidy mechanisms, strengthening agricultural extension systems in non-major grain areas, and promoting coordination between subsidy policies, land transfer programs, and agricultural socialized services.