Social relations, public interventions and land rent deviation: Evidence from Jiangsu Province in China

Abstract

The price mechanism plays an important role in allocating resources and enhancing economic efficiency and equity of land markets. In this paper, we examine the impacts of social relations between rental partners and public interventions imposed by local governments or village collectives on land rent deviation and discuss efficiency and equity impacts as well. Household-level data collected in 2014 covering 907 households in 30 villages in Jiangsu Province, China, are used for empirical analysis. We find that social relations based on blood ties and geographical location increase the levels of land rent deviation and lead to a loss of efficiency and equity of the segmented land rental market. However, public interventions, i.e., land use limitations, collective permission and collective organization, may contribute to reducing land rent deviation and improving the efficiency and equity of the market. Further evidence suggests that public interventions induce land rental transactions among partners other than relatives or familiar villagers.