IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v10y2018i8p2813-d162664.html
   My bibliography  Save this article

Why the Uncertain Term Occurs in the Farmland Lease Market: Evidence from Rural China

Author

Listed:
  • Baoling Zou

    (National School of Agricultural Institution and Development, South China Agricultural University, Guangzhou 510642, China
    College of Economics and Management, South China Agricultural University, Guangzhou 510642, China)

  • Biliang Luo

    (National School of Agricultural Institution and Development, South China Agricultural University, Guangzhou 510642, China
    College of Economics and Management, South China Agricultural University, Guangzhou 510642, China)

Abstract

Urbanization and aging of the agricultural population lead to the insufficient supply of agricultural labor and land being idle in rural China, calling for the farmland lease market to maintain sustainable and efficient use of farmland. However, rural households tend to agree on an uncertain term for farmland leasing in/out, which leads to low efficiency and land loss in agriculture. Therefore, using the survey data collected from 2704 rural households and a logistic regression model, we examine the effects of risk faced by the rural households on the likelihood of the uncertain term for farmland leasing. Results reveal that a large share of labor with low education and high income increase the likelihood of an uncertain term for farmland leasing out activities, while a high disaster frequency, a high education of household and a high share of agricultural income increase the probability of an uncertain term for farmland leasing in activities. Additionally, leasing farmland to/from relatives or neighbors, informal contracts, low rent and the lack of pension insurance also increase the likelihood of the uncertain term for farmland leasing out/in activities. Findings suggest that more attention should be paid to education, agricultural insurance and social security system in rural areas.

Suggested Citation

  • Baoling Zou & Biliang Luo, 2018. "Why the Uncertain Term Occurs in the Farmland Lease Market: Evidence from Rural China," Sustainability, MDPI, vol. 10(8), pages 1-15, August.
    • Handle: RePEc:gam:jsusta:v:10:y:2018:i:8:p:2813-:d:162664
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/10/8/2813/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/10/8/2813/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nicholas D. Paulson & Gary D. Schnitkey, 2013. "Farmland rental markets: trends in contract type, rates, and risk," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 73(1), pages 32-44, May.
    2. Sergei Guriev & Dmitriy Kvasov, 2005. "Contracting on Time," American Economic Review, American Economic Association, vol. 95(5), pages 1369-1385, December.
    3. Jonasson, Erik & Helfand, Steven M., 2010. "How Important are Locational Characteristics for Rural Non-agricultural Employment? Lessons from Brazil," World Development, Elsevier, vol. 38(5), pages 727-741, May.
    4. Nöldeke, Georg & Schmidt, Klaus M., 1995. "Option contracts and renegotiation," Munich Reprints in Economics 19329, University of Munich, Department of Economics.
    5. Otsuka, Keijiro & Chuma, Hiroyuki & Hayami, Yujiro, 1992. "Land and Labor Contracts in Agrarian Economies: Theories and Facts," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 1965-2018, December.
    6. repec:hal:spmain:info:hdl:2441/4et5cqo2b89lursqp7n50mt26c is not listed on IDEAS
    7. Jin, Songqing & Deininger, Klaus, 2009. "Land rental markets in the process of rural structural transformation: Productivity and equity impacts from China," Journal of Comparative Economics, Elsevier, vol. 37(4), pages 629-646, December.
    8. Oliver Hart & John Moore, 2008. "Contracts as Reference Points," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(1), pages 1-48.
    9. Allen, Douglas W & Lueck, Dean, 1995. "Risk Preferences and the Economics of Contracts," American Economic Review, American Economic Association, vol. 85(2), pages 447-451, May.
    10. repec:dau:papers:123456789/12331 is not listed on IDEAS
    11. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
    12. James Bryan & B. James Deaton & Alfons Weersink, 2015. "Do Landlord-Tenant Relationships Influence Rental Contracts for Farmland or the Cash Rental Rate?," Land Economics, University of Wisconsin Press, vol. 91(4), pages 650-663.
    13. John Pender & Marcel Fafchamps, 2006. "Land Lease Markets and Agricultural Efficiency in Ethiopia," Journal of African Economies, Centre for the Study of African Economies, vol. 15(2), pages 251-284, June.
    14. Hart, Oliver D & Moore, John, 1988. "Incomplete Contracts and Renegotiation," Econometrica, Econometric Society, vol. 56(4), pages 755-785, July.
    15. Brousseau,Eric & Glachant,Jean-Michel (ed.), 2002. "The Economics of Contracts," Cambridge Books, Cambridge University Press, number 9780521814904.
    16. Douglas W. Allen & Dean Lueck, 2004. "The Nature of the Farm: Contracts, Risk, and Organization in Agriculture," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511851, December.
    17. Oliver Hart, 2017. "Incomplete Contracts and Control," American Economic Review, American Economic Association, vol. 107(7), pages 1731-1752, July.
    18. Masten, Scott E & Crocker, Keith J, 1985. "Efficient Adaptation in Long-term Contracts: Take-or-Pay Provisions for Natural Gas," American Economic Review, American Economic Association, vol. 75(5), pages 1083-1093, December.
    19. Georg Noldeke & Klaus M. Schmidt, 1995. "Option Contracts and Renegotiation: A Solution to the Hold-Up Problem," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 163-179, Summer.
    20. Ernst Fehr & Oliver Hart & Christian Zehnder, 2011. "Contracts as Reference Points--Experimental Evidence," American Economic Review, American Economic Association, vol. 101(2), pages 493-525, April.
    21. Brousseau,Eric & Glachant,Jean-Michel (ed.), 2002. "The Economics of Contracts," Cambridge Books, Cambridge University Press, number 9780521893138.
    22. Maija Halonen-Akatwijuka & Oliver Hart, 2015. "Short-term, Long-term, and Continuing Contracts," NBER Working Papers 21005, National Bureau of Economic Research, Inc.
    23. Ernst Fehr & Oliver Hart & Christian Zehnder, 2008. "Contracts as reference points � experimental evidence," IEW - Working Papers 393, Institute for Empirical Research in Economics - University of Zurich.
    24. Deininger, Klaus & Xia, Fang, 2018. "Assessing the long-term performance of large-scale land transfers: Challenges and opportunities in Malawi’s estate sector," World Development, Elsevier, vol. 104(C), pages 281-296.
    25. Min, Shi & Waibel, Hermann & Huang, Jikun, 2017. "Smallholder participation in the land rental market in a mountainous region of Southern China: Impact of population aging, land tenure security and ethnicity," Land Use Policy, Elsevier, vol. 68(C), pages 625-637.
    26. Klaus Deininger & Daniel Ayalew Ali & Tekie Alemu, 2011. "Impacts of Land Certification on Tenure Security, Investment, and Land Market Participation: Evidence from Ethiopia," Land Economics, University of Wisconsin Press, vol. 87(2), pages 312-334.
    27. Ohlmer, Bo & Olson, Kent & Brehmer, Berndt, 1998. "Understanding farmers' decision making processes and improving managerial assistance," Agricultural Economics, Blackwell, vol. 18(3), pages 273-290, May.
    28. Hongyun Han & Hanning Li, 2018. "The Distribution of Residual Controls and Risk Sharing: A Case Study of Farmland Transfer in China," Sustainability, MDPI, vol. 10(6), pages 1-20, June.
    29. Bo ÖhlméYr & Kent Olson & Berndt Brehmer, 1998. "Understanding farmers' decision making processes and improving managerial assistance," Agricultural Economics, International Association of Agricultural Economists, vol. 18(3), pages 273-290, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Adewale Henry Adenuga & Claire Jack & Ronan McCarry, 2021. "The Case for Long-Term Land Leasing: A Review of the Empirical Literature," Land, MDPI, vol. 10(3), pages 1-21, March.
    2. He, Yiming & Collins, Alan R., 2021. "The effect of information structure on farmland contractual choice: toward a revised theory of share tenancy with new evidence from Guangdong, China," International Review of Law and Economics, Elsevier, vol. 65(C).
    3. Fujia Sui & Yinsheng Yang & Shizhen Zhao, 2022. "Labor Structure, Land Fragmentation, and Land-Use Efficiency from the Perspective of Mediation Effect: Based on a Survey of Garlic Growers in Lanling, China," Land, MDPI, vol. 11(6), pages 1-17, June.
    4. Si, Ruishi & Lu, Qian & Aziz, Noshaba, 2021. "Does the stability of farmland rental contract & conservation tillage adoption improve family welfare? Empirical insights from Zhangye, China," Land Use Policy, Elsevier, vol. 107(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hoppe, Eva I. & Schmitz, Patrick W., 2011. "Can contracts solve the hold-up problem? Experimental evidence," Games and Economic Behavior, Elsevier, vol. 73(1), pages 186-199, September.
    2. Olivier Meier & Aurélie Sannajust, 0. "The smart contract revolution: a solution for the holdup problem?," Small Business Economics, Springer, vol. 0, pages 1-16.
    3. Olivier Meier & Aurélie Sannajust, 2021. "The smart contract revolution: a solution for the holdup problem?," Small Business Economics, Springer, vol. 57(2), pages 1073-1088, August.
    4. Hongyun Han & Hanning Li, 2018. "The Distribution of Residual Controls and Risk Sharing: A Case Study of Farmland Transfer in China," Sustainability, MDPI, vol. 10(6), pages 1-20, June.
    5. Anjana Susarla & Ramanath Subramanyam & Prasanna Karhade, 2010. "Contractual Provisions to Mitigate Holdup: Evidence from Information Technology Outsourcing," Information Systems Research, INFORMS, vol. 21(1), pages 37-55, March.
    6. Fabian Herweg & Klaus M. Schmidt, 2015. "Loss Aversion and Inefficient Renegotiation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(1), pages 297-332.
    7. Herweg, Fabian & Karle, Heiko & Müller, Daniel, 2018. "Incomplete contracting, renegotiation, and expectation-based loss aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 145(C), pages 176-201.
    8. Ting Zhang & Ke Huang & Anlu Zhang, 2021. "Choice of Rural Collective Construction Land Sales and Rental Markets at the Theoretical Framework of Williamson’s Transaction Costs: Evidence from Nanhai District, Guangdong Province, China," Sustainability, MDPI, vol. 13(15), pages 1-16, July.
    9. Kim, Yoonha, 2021. "Linking theories of incomplete contracts to empirics in IPO contracting," Finance Research Letters, Elsevier, vol. 41(C).
    10. Patrick W Schmitz, 2022. "How (Not) to Purchase Novel Goods and Services: Specific Performance Versus at-will Contracts," The Economic Journal, Royal Economic Society, vol. 132(647), pages 2563-2577.
    11. Göller, Daniel, 2021. "How Long-Term Contracts can Mitigate Inefficient Renegotiation Arising Due to Loss Aversion," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224598, Verein für Socialpolitik / German Economic Association, revised 2021.
    12. Bernard Baudry & Virgile Chassagnon, 2012. "The vertical network organization as a specific governance structure: what are the challenges for incomplete contracts theories and what are the theoretical implications for the boundaries of the (hub," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 16(2), pages 285-303, May.
    13. Daniel Barron & Robert Gibbons & Ricard Gil & Kevin J.Murphy, 2020. "Relational Adaptation Under Reel Authority," Management Science, INFORMS, vol. 66(5), pages 1868-1889, May.
    14. Nicholas S. Argyres & Teppo Felin & Nicolai Foss & Todd Zenger, 2012. "Organizational Economics of Capability and Heterogeneity," Organization Science, INFORMS, vol. 23(5), pages 1213-1226, October.
    15. Müller, Daniel & Schmitz, Patrick W., 2016. "Transaction costs and the property rights approach to the theory of the firm," European Economic Review, Elsevier, vol. 87(C), pages 92-107.
    16. Halonen-Akatwijuka, Maija, 2012. "Nature of human capital, technology and ownership of public goods," Journal of Public Economics, Elsevier, vol. 96(11), pages 939-945.
    17. Schmidt, Klaus, 2017. "The 2016 Nobel Memorial Prize in Contract Theory," Rationality and Competition Discussion Paper Series 19, CRC TRR 190 Rationality and Competition.
    18. Jean Beuve & Stéphane Saussier, 2012. "Interfirm cooperation in strategic relationships: the role of formal contract," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 21(4), pages 811-836, August.
    19. Li, Xingguang & Liu, Jundi & Huo, Xuexi, 2021. "Impacts of tenure security and market-oriented allocation of farmland on agricultural productivity: Evidence from China’s apple growers," Land Use Policy, Elsevier, vol. 102(C).
    20. Tongwei Qiu & Xinjie Shi & Biliang Luo, 2022. "Formalizing agricultural rentals in China: Does local public action help?," Development Policy Review, Overseas Development Institute, vol. 40(4), July.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:10:y:2018:i:8:p:2813-:d:162664. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.