Farmland Rental Participation, Agricultural Productivity, and Household Income: Evidence from Rural China

Abstract

The rural land rental market is playing an increasingly important role in the agricultural transformation period for developing countries, including China, where rural farmland rental is highly context-specific with the implementation of the collective-owned rural land system; thus, in turn, the access to farmland rental markets for rural households has profoundly influenced their livelihood strategies and income earnings. This paper investigates the income impact differences caused by rural households’ farmland rental participation activities and explores such impact mechanisms by further evaluating the income impacts caused by rental area and household agricultural productivity. Data from the Chinese national household survey were used for estimating the empirical models. Our results show that farmland renting has positively affected households’ on-farm and total income, but there is no significant effect upon off-farm income. According to income differences across quantiles, we find households with high on-farm income are more sensitive about enlarging their farm size by renting farmland, and households with middle and upper-middle off-income may benefit more from renting out their farmland. Furthermore, the joint effects of renting area and household agricultural productivity on lessee households’ farm income is significantly positive. For lessor households, our results indicate that renting out farmland did not improve their off-farm and total income as it may have a limited effect on farm household labor distribution. Our findings suggest that engaging in farmland rental activity can enhance farming productivity efficiency and poverty alleviation among rural households. Under the collective-owned rural land system, it is urgent and necessary to initiate and design incentive policies to encourage highly efficient large farms to expand the farm size and provide smallholders with equal opportunities to engage in farmland rental activities.