Land Transfer and Rural Household Consumption Diversity: Promoting or Inhibiting?

Abstract

Land resources are important for millions of rural households in China. With the land tenure system reform and the trend of nonfarm employment, land transfer affects household income and consumption diversity significantly. Utilizing the data from the China Family Panel Studies (CFPS) 2018, this study investigated the effects of land transfer on Chinese rural households’ consumption diversity, measured by the Simpson index. In order to mitigate the endogeneity problems caused by reverse causality and selection bias between farmers’ household land transfer decisions and consumption behavior, we employed the propensity score matching (PSM) method and instrumental variable (IV) method. Besides, the Shannon index was also used to measure consumption diversity for the robustness test. The results showed that the rural households who have transferred others’ land in would decrease their consumption diversity, while the households who have transferred their land out would increase their consumption diversity. Heterogeneity analysis showed that land transfer had different degrees of impact on rural households with different income groups and was more significant for low-income households. Specifically, compared with higher-income households, both the promotion effect of land transfer out and the inhibitory effect of land transfer on consumption diversity were more obvious for lower-income households.