Gains and losses: Does farmland acquisition harm farmers’ welfare?

Based on data from the China Household Income Project in 2013, this study empirically evaluates the income effect and happiness effect of land acquisition. The results show that land acquisition improves household income but reduces individual happiness. Propensity score matching (PSM) methods have proved the robustness of this result. The mechanism analysis shows that (1) land compensation is not enough to generate “labor supply effect”, whereas land acquisition intensity has a dominant effect which promotes households allocate more labor on off-farm labor market, especially on local off-farm activities. The positive income effect is significant only in the eastern region of China. (2) Both the great deprivation of farmland and compensation inequality have a negative effect on happiness level, but various forms of non-pecuniary compensation have no significant effect on happiness improvement. We conclude that the increase in household income cannot offset the negative effect of land acquisition on happiness, the decrease in happiness levels of land-lost farmers may be largely due to the compensatio system which has not provided fair compensation and not sufficiently taken full account of how to secure their property rights and ensure their long-term livelihood. Finally, we provide recommendations on the reform of the current land acquisition system to improve the interests and welfare of land-lost farmers during the process of urbanization.