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China's new agricultural subsidy and land rental market development: The dual perspective of efficiency and equity

Author

Listed:
  • Zhang, Jian
  • Mishra, Ashok K.
  • Zheng, Linyi

Abstract

This study investigates the impact of China's agricultural subsidies on farmers' decisions to participate in the land rental market and analyzes their effects on efficiency and equity. The study uses a double-hurdle method with panel data from rural China. Results show that, on average, a 1 % increase in agricultural subsidies increases the likelihood of farm households renting-in land by 1.0 % and the total amount of land rented-in by 0.6 %. Agricultural subsidies improve the efficiency of the farmland rental market, facilitating the transfer of land to more efficient households. However, agricultural subsidies also tend to benefit village elites more, incentivizing them to acquire land, thus reducing the equity of the land rental market. Mechanism analysis reveals that new subsidies increased farm households' income and alleviated liquidity constraints, improving the comparative returns to farming.

Suggested Citation

  • Zhang, Jian & Mishra, Ashok K. & Zheng, Linyi, 2025. "China's new agricultural subsidy and land rental market development: The dual perspective of efficiency and equity," China Economic Review, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:chieco:v:92:y:2025:i:c:s1043951x25000781
    DOI: 10.1016/j.chieco.2025.102420
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    More about this item

    Keywords

    Land rental; land contract rights; Cobb-Douglas; Farming ability; Household income; Efficiency;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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