Participation in land rental and labor markets and agricultural economic performance of banana farmers in China

Abstract

The emerging marketization of agricultural factors allows farmers to expand agricultural production by renting in farmland from land rental market or purchasing services through labor market. Farmers’ transactions in the two markets can stimulate the agricultural transformation in developing countries, but may increase their financial burden in agriculture. Based on the primary data collected from banana farmers in China, this study attempts to clarify farmers categories based on their different choices regarding participation in land rental and labor markets for agricultural production, analyze the determinants of farmers’ simultaneous participation in the two markets, and explore heterogenous effects of farmers’ market participation on agricultural economic performances using the multinomial endogenous switching treatment regression model. The results show that farmer’s tie to retailers is highlighted as an important driving force behind farmers’ simultaneous participation in the two markets, while their participation choices are also varying due to different household head characteristics and family resource endowments. Farmers who participated in the two markets significantly reduce the cost of material input in agricultural production, but the total production cost of participants is higher than that of non-participants due to the high rent of land resource and cost of hired labor for production services. Interestingly, farmers’ participation in land rental market increases the yield of their farms, while participation in labor market has a negative impact on the yield. Farmers’ participation in both land rental and labor markets can significantly increase farm net income by nearly 67 %. In contrast, participation in labor market decreased farm net income by 22 %, whilst participation in land rental market increased farm net income by 186 %, though without statistical significance. The findings underscore the important role of land rental markets in boosting farm economic performance. Policymakers can facilitate land transfer among smallholder farmers in the land rental market and promote agricultural technologies to substitute labor force so as to reduce the adverse effect of labor market, thereby improving agricultural economic performances in developing regions.