What Affects Participation in the Farmland Rental Market in Rural China? Evidence from CHARLS

Yahui Wang

doi:10.3390/su11247021

Abstract

Land fragmentation and the small size of land parcels are still the major bottlenecks for agriculture sustainable development in rural China, and an efficient land rental market could consolidate land plots and realize agricultural management at a moderate scale. However, transaction cost is still the main obstacle of land transfer. It is, therefore, essential to reduce the excessive transaction costs in the process of transfer; the primary task is to identify the roots of transaction costs. In order to accurately identify the sources of transaction costs, a generalized ordered Logit model with thresholds that allowed transaction costs to affect different directions of land transfer was developed using the China Health and Retirement Longitudinal Survey in 2015. The results suggested that the roots of transaction costs presented significant differences regarding the supply and demand of cropland. For the supply of land, the land titling program, land transfer intermediaries, and well-planned roads were the three most important factors that reduced transaction costs. For the demand of land, the three critical measures for reducing the transaction costs were well-planned roads, land consolidation, and the land titling program. The government should continue to push forward the land titling program and land consolidation projects in rural China, especially in hilly and mountainous areas. The infrastructure that greatly restricted agricultural development should be improved at a moderate level and the system of land circulating intermediary services at the township level should be established.

Highlights

In the last 30 years, China has achieved substantial economic growth, a proportion of the rural population remains in poverty
In order to raise peasants’ income, the government has implemented a variety of stimulus programs that cultivate the land rental market and encourage peasants to participate in cropland transfer, with the aim of realizing effective large-scale management
The high transaction costs are the root of the inefficient operation of the land rental market [7,8,9], together with the uncertainty of tenure [10,11] and the unwillingness of small-scale peasants to enter into contracts [12]

Summary

Introduction

In the last 30 years, China has achieved substantial economic growth, a proportion of the rural population remains in poverty. The high transaction costs are the root of the inefficient operation of the land rental market [7,8,9], together with the uncertainty of tenure [10,11] and the unwillingness of small-scale peasants to enter into contracts [12]. The existence of these transaction costs has severely dampened the enthusiasm to take part in the land rental market, in Ethiopia, Vietnam, China, Europe, America, and other regions [7,13,14,15]. Our findings will help to improve the understanding of the inefficiency of the cropland rental market, and will help to improve the vitality of the cropland rental market in order to promote the efficient use of cropland in rural China

Land Tenure Reform in China

Establishment of the HCRS

Improvement of the Tenure Security

Materials and Methods

Development Level of the Land Rental Market in China

Determinants of Cropland Rental Market Participation