Abstract
The development of the land rental market has been widely attributed to the associated institutional regime and the functioning of the off-farm labor market. However, little is known of the interaction effect of these two factors. To fill this gap, we employ a nationwide representative household dataset to investigate the effects of China’s collective forest tenure reform (CFTR) and off-farm employment on forestland transfer in China. Special interest is focused on their potential interaction effect. The Smith-Blundell instrumental variable tobit model is adopted to account for the endogeneity of off-farm employment. The estimation results show that both the tenure reform and off-farm employment significantly influence forestland transactions. However, compared to the positive effect of the reform on both renting in and renting out forestland, the effect of off-farm employment is mixed, that is, its effect is negative when forestland is rented in but positive on rent-out decisions. An important finding is that the CFTR imposes a negative enhancement effect on forestland rent-in through its interaction term with off-farm employment. In contrast, the enhancement effect on rent-out is not statistically significant, which may be due to the neutralization by the endowment effect of the CFTR.
Highlights
Being considered a big success, the main-body reform brought about some undesired consequences
Using the case of China’s collective forest tenure reform (CFTR), we have examined the effects of policy-induced institutional change and off-farm employment on forestland transfer
Particular interest was focused on the plausible interaction effect between the CFTR and off-farm employment
Summary
Being considered a big success, the main-body reform brought about some undesired consequences. As Deininger et al [20] argue, secure property rights could encourage migration of rural labor, and a sustained increase in off-farm employment would foster the importance of secure land tenure. This assumption has gained empirical evidences [16,19,28,29] Their studies focus on the context of farmland transfer with the data from specific regions, while this paper employs nationally representative data to investigate the behavior of forestland transfer). An instrumental variable (IV) tobit estimator is used in this paper, to account for the potential endogeneity and the censoring issues
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