Abstract
This paper focuses on the impact of a new rural land reform, the Separation of Three Rights Reform, on changes in China’s agricultural production organizations. We illustrate the impact of market and nonmarket mechanisms on allocating agricultural production factors under the new rural land market transition through a land system and factor allocation model. Based on the expansion paths of different types of factors in the model, we classify the development of Chinese agricultural production entities into “extensional expansion,” “labor-intensive expansion,” “land-intensive expansion,” and “exit of agricultural production.” These agricultural production paths correspond to agricultural enterprises, family farms, agricultural cooperatives, and small farmers’ exit. Further, empirical and economic geography analysis results show that the interaction of market and nonmarket mechanisms is the main drive that induces the current diversified organizations in rural China. Thus, this paper provides a comprehensive explanation of changing patterns of an agricultural production organization under the transition of the rural land market.
Highlights
Compared with rural product markets, the process of factor marketization in rural China has been slow
Comparing the three types of agricultural business entities, we find that in rural land factor market transformation, market and nonmarket mechanisms intertwine to influence resource allocation and eventually induce the formation of an agricultural production organization
Based on a model of factor allocation under a land system reform, this paper illustrates the influence of market and nonmarket mechanisms on the factor allocation of agricultural production to induce the emergence of different agricultural production organizations
Summary
Compared with rural product markets, the process of factor marketization in rural China has been slow. The pressure of the vast population scale and limited rural land makes poorly efficient small rural households unable to support China’s sustainable agricultural development. China needs a more efficient organization of agricultural production. Gershon et al (1992) argue that as the rural labor market’s constraints gradually disappear, China will likely generate market-driven land transfer and large-scale agricultural production [3]. Over the past two decades, the household registration system’s reform has largely removed institutional barriers to rural labor marketization. Lin studied the “induced” resource allocation with Chinese characteristics [8]: the relative marginal productivity of land and labor replaces the price mechanism to influence farmers’ decision on resource allocation and choice of technology in agricultural production given incomplete rural factors market
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