IDEAS home Printed from https://ideas.repec.org/a/eee/lauspo/v109y2021ics0264837721003446.html
   My bibliography  Save this article

An empirical study of land rental development in rural Gansu, China: The role of agricultural cooperatives and transaction costs

Author

Listed:
  • Li, Xinyi
  • Ito, Junichi

Abstract

The land rental ratio in China has increased significantly over recent years, with the national average reaching 37% in 2017. A significant body of literature has analyzed the driving force behind this movement; however, there still remains much to be learned about the land rental markets in rural China. This paper analyzes the factors that influence the land exchange in Gansu province whose land rental ratio was among the lowest in China at the start of the 2010s. Our contribution to the literature is to provide empirical insights into the factors that promote and impede the development of land rental markets. To this end, we estimate the land rental ratio equation using a panel dataset of 86 counties in Gansu province. The identification strategy is an application of the instrumental variable estimation method based on a fixed effects model. We draw the following conclusions from the analysis. First, agricultural cooperatives have a positive impact on the land rental development, suggesting that non-farm household producers are the major contributors to the demand side of farmland exchange. Second, transaction costs have a detrimental effect on land exchange, as theoretically supported by this study as well as empirical finding in the literature. Accordingly, the public organizations and/or rural collective play a vital role in reducing the transaction costs arising from land use disputes among lessors and lessees.

Suggested Citation

  • Li, Xinyi & Ito, Junichi, 2021. "An empirical study of land rental development in rural Gansu, China: The role of agricultural cooperatives and transaction costs," Land Use Policy, Elsevier, vol. 109(C).
    • Handle: RePEc:eee:lauspo:v:109:y:2021:i:c:s0264837721003446
    DOI: 10.1016/j.landusepol.2021.105621
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264837721003446
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.landusepol.2021.105621?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Wang, Hui & Riedinger, Jeffrey & Jin, Songqing, 2015. "Land documents, tenure security and land rental development: Panel evidence from China," China Economic Review, Elsevier, vol. 36(C), pages 220-235.
    2. Deininger, Klaus & Jin, Songqing, 2005. "The potential of land rental markets in the process of economic development: Evidence from China," Journal of Development Economics, Elsevier, vol. 78(1), pages 241-270, October.
    3. Ying Liu & Chenggang Wang & Zeng Tang & Zhibiao Nan, 2018. "Will farmland transfer reduce grain acreage? Evidence from Gansu province, China," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 10(2), pages 277-292, May.
    4. Yang Yao, 2000. "The Development of the Land Lease Market in Rural China," Land Economics, University of Wisconsin Press, vol. 76(2), pages 252-266.
    5. Cheng, Wenli & Xu, Yuyun & Zhou, Nan & He, Zaizhong & Zhang, Longyao, 2019. "How did land titling affect China’s rural land rental market? Size, composition and efficiency," Land Use Policy, Elsevier, vol. 82(C), pages 609-619.
    6. Zuhui Huang & Qiao Liang, 2018. "Agricultural organizations and the role of farmer cooperatives in China since 1978: past and future," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 10(1), pages 48-64, February.
    7. Emmanuel Skoufias, 1995. "Household Resources, Transaction Costs, and Adjustment through Land Tenancy," Land Economics, University of Wisconsin Press, vol. 71(1), pages 42-56.
    8. Lohmar, Bryan & Zhang, Zhaoxin & Somwaru, Agapi, 2001. "Land Rental Market Development And Agricultural Production In China," 2001 Annual meeting, August 5-8, Chicago, IL 20683, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    9. Martin Ravallion & Dominique van de Walle, 2006. "Land Reallocation in an Agrarian Transition," Economic Journal, Royal Economic Society, vol. 116(514), pages 924-942, October.
    10. Jacob Ricker-Gilbert & Jordan Chamberlin, 2018. "Transaction Costs, Land Rental Markets, and Their Impact on Youth Access to Agriculture in Tanzania," Land Economics, University of Wisconsin Press, vol. 94(4), pages 541-555.
    11. Tang, Liang & Ma, Xianlei & Zhou, Yuepeng & Shi, Xiaoping & Ma, Jia, 2019. "Social relations, public interventions and land rent deviation: Evidence from Jiangsu Province in China," Land Use Policy, Elsevier, vol. 86(C), pages 406-420.
    12. Deininger, Klaus & Jin, Songqing & Xia, Fang & Huang, Jikun, 2014. "Moving Off the Farm: Land Institutions to Facilitate Structural Transformation and Agricultural Productivity Growth in China," World Development, Elsevier, vol. 59(C), pages 505-520.
    13. Eswaran, Mukesh & Kotwal, Ashok, 1985. "A Theory of Two-Tier Labor Markets in Agrarian Economies," American Economic Review, American Economic Association, vol. 75(1), pages 162-177, March.
    14. 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.
    15. Dwayne Benjamin & Loren Brandt, 2002. "Property rights, labour markets, and efficiency in a transition economy: the case of rural China," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 35(4), pages 689-716, November.
    16. Schmitt, Gunther, 1991. "Why Is the Agriculture of Advanced Western Economies Still Organized by Family Farms? Will This Continue to Be So in the Future?," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 18(3-4), pages 443-458.
    17. Lowder, Sarah K. & Skoet, Jakob & Raney, Terri, 2016. "The Number, Size, and Distribution of Farms, Smallholder Farms, and Family Farms Worldwide," World Development, Elsevier, vol. 87(C), pages 16-29.
    18. Kung, James Kai-sing & Shimokawa, Satoru, 2012. "Land Reallocations, Passive Land Rental, and the Development of Rental Markets in Rural China," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 125099, International Association of Agricultural Economists.
    19. Kung, James Kai-sing, 2002. "Off-Farm Labor Markets and the Emergence of Land Rental Markets in Rural China," Journal of Comparative Economics, Elsevier, vol. 30(2), pages 395-414, June.
    20. Jikun Huang & Jiping Ding, 2016. "Institutional innovation and policy support to facilitate small-scale farming transformation in China," Agricultural Economics, International Association of Agricultural Economists, vol. 47(S1), pages 227-237, November.
    21. Liu, Ziming & Rommel, Jens & Feng, Shuyi & Hanisch, Markus, 2017. "Can land transfer through land cooperatives foster off-farm employment in China?," China Economic Review, Elsevier, vol. 45(C), pages 35-44.
    22. Shi, Xiaoping & Chen, Shujie & Ma, Xianlei & Lan, Jing, 2018. "Heterogeneity in interventions in village committee and farmland circulation: Intermediary versus regulatory effects," Land Use Policy, Elsevier, vol. 74(C), pages 291-300.
    23. Pollak, Robert A, 1985. "A Transaction Cost Approach to Families and Households," Journal of Economic Literature, American Economic Association, vol. 23(2), pages 581-608, June.
    24. Deininger, Klaus & Jin, Songqing, 2009. "Securing property rights in transition: Lessons from implementation of China's rural land contracting law," Journal of Economic Behavior & Organization, Elsevier, vol. 70(1-2), pages 22-38, May.
    25. 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.
    26. Macours, Karen & Janvry, Alain de & Sadoulet, Elisabeth, 2010. "Insecurity of property rights and social matching in the tenancy market," European Economic Review, Elsevier, vol. 54(7), pages 880-899, October.
    27. Ying Liu & Chenggang Wang & Zeng Tang & Zhibiao Nan, 2019. "Does Farmland Rental Contribute to Reduction of Agrochemical Use? A Case of Grain Production in Gansu Province, China," Sustainability, MDPI, vol. 11(8), pages 1-15, April.
    28. Shingo Kimura & Keijiro Otsuka & Tetsushi Sonobe & Scott Rozelle, 2011. "Efficiency of Land Allocation through Tenancy Markets: Evidence from China," Economic Development and Cultural Change, University of Chicago Press, vol. 59(3), pages 485-510.
    29. Loren Brandt & Scott Rozelle & Matthew A. Turner, 2004. "Local Government Behavior and Property Right Formation in Rural China," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 160(4), pages 627-662, December.
    30. Nigel Key & Elisabeth Sadoulet & Alain De Janvry, 2000. "Transactions Costs and Agricultural Household Supply Response," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(2), pages 245-259.
    31. Allen, Douglas W & Lueck, Dean, 1998. "The Nature of the Farm," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 343-386, October.
    32. Wang, Yahui & Li, Xiubin & Li, Wei & Tan, Minghong, 2018. "Land titling program and farmland rental market participation in China: Evidence from pilot provinces," Land Use Policy, Elsevier, vol. 74(C), pages 281-290.
    33. Zhang, Bangbang & Niu, Wenhao & Ma, Linyan & Zuo, Xuyang & Kong, Xiangbin & Chen, Haibin & Zhang, Yifan & Chen, Wei & Zhao, Minjuan & Xia, Xianli, 2019. "A company-dominated pattern of land consolidation to solve land fragmentation problem and its effectiveness evaluation: A case study in a hilly region of Guangxi Autonomous Region, Southwest China," Land Use Policy, Elsevier, vol. 88(C).
    34. Ito, Junichi & Bao, Zongshun & Ni, Jing, 2016. "Land rental development via institutional innovation in rural Jiangsu, China," Food Policy, Elsevier, vol. 59(C), pages 1-11.
    35. Zhou, Yang & Li, Xunhuan & Liu, Yansui, 2020. "Rural land system reforms in China: History, issues, measures and prospects," Land Use Policy, Elsevier, vol. 91(C).
    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. Meng Yang & Ting Sun & Tao Liu, 2023. "The Heterogeneous Effects of Multilevel Centers on Farmland Transfer: Evidence from Tai’an Prefecture, China," Land, MDPI, vol. 12(10), pages 1-19, September.
    2. Li, Xinyi & Ito, Junichi, 2023. "Determinants of technical efficiency and farmers’ crop choice rationality: A case study of rural Gansu, China," Journal of Asian Economics, Elsevier, vol. 84(C).
    3. Yuanjie Zhang & Shichao Yuan & Jian Wang & Jian Cheng & Daolin Zhu, 2022. "How Do the Different Types of Land Costs Affect Agricultural Crop-Planting Selections in China?," Land, MDPI, vol. 11(11), pages 1-18, October.
    4. Lu, Chen-Fu & Cheng, Chia-Yi, 2023. "Does the change of agricultural zoning policy achieve farmland protection in Taiwan?," Land Use Policy, Elsevier, vol. 126(C).
    5. Ruishi Si & Yumeng Yao & Xueqian Zhang & Qian Lu & Noshaba Aziz, 2022. "Exploring the Role of Contiguous Farmland Cultivation and Adoption of No-Tillage Technology in Improving Transferees’ Income Structure: Evidence from China," Land, MDPI, vol. 11(4), pages 1-25, April.
    6. Vincent Yuansang Zha, 2021. "The Burst Market: the Next Leap for Humanity," Papers 2112.06646, arXiv.org, revised Jan 2024.
    7. Yuanyuan Chen & Mu Li & Zemin Zhang, 2023. "Does the Rural Land Transfer Promote the Non-Grain Production of Cultivated Land in China?," Land, MDPI, vol. 12(3), pages 1-16, March.
    8. Samal Kaliyeva & Francisco Jose Areal & Yiorgos Gadanakis, 2021. "Would Kazakh Citizens Support a Milk Co-Operative System?," Agriculture, MDPI, vol. 11(7), pages 1-19, July.
    9. Guangsheng Liu & Lesong Zhao & Huiying Chen & Yuting Zhou & Hanbing Lin & Cunyue Wang & Haojuan Huang & Xiting Li & Zhongyou Yuan, 2022. "Does Farmland Transfer Lead to Non-Grain Production in Agriculture?—An Empirical Analysis Based on the Differentiation of Farmland Renting-In Objects," Sustainability, MDPI, vol. 15(1), pages 1-17, December.

    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. Zhang, Jian & Mishra, Ashok K. & Ma, Xianlei, 2023. "Mechanism of Chinese farmers’ land rental participation: The role of invisible markets and public intervention," Food Policy, Elsevier, vol. 117(C).
    2. Han Zhang & Jari Kuuluvainen & Youliang Ning & Wenmei Liao & Can Liu, 2017. "Institutional Regime, Off-Farm Employment, and the Interaction Effect: What are the Determinants of Households’ Forestland Transfer in China?," Sustainability, MDPI, vol. 9(10), pages 1-15, October.
    3. Ruifeng Liu & Zhifeng Gao & Yefan Nian & Hengyun Ma, 2020. "Does Social Relation or Economic Interest Affect the Choice Behavior of Land Lease Agreement in China? Evidence from the Largest Wheat−Producing Henan Province," Sustainability, MDPI, vol. 12(10), pages 1-19, May.
    4. Ito, Junichi & Bao, Zongshun & Ni, Jing, 2016. "Land rental development via institutional innovation in rural Jiangsu, China," Food Policy, Elsevier, vol. 59(C), pages 1-11.
    5. Che, Yi, 2009. "Mismatch: land reallocations, recovery land rental and land rental market development in rural China," MPRA Paper 39794, University Library of Munich, Germany.
    6. 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.
    7. Tongwei, Qiu & Luo, Biliang & Boris Choy, S.T. & Li, Yifei & He, Qinying, 2020. "Do land renting-in and its marketization increase labor input in agriculture? Evidence from rural China," Land Use Policy, Elsevier, vol. 99(C).
    8. Zhang, Jian & Mishra, Ashok K. & Hirsch, Stefan, 2021. "Market-oriented agriculture and farm performance: Evidence from rural China," Food Policy, Elsevier, vol. 100(C).
    9. Cheng, Wenli & Xu, Yuyun & Zhou, Nan & He, Zaizhong & Zhang, Longyao, 2019. "How did land titling affect China’s rural land rental market? Size, composition and efficiency," Land Use Policy, Elsevier, vol. 82(C), pages 609-619.
    10. Yuanjie Zhang & Shichao Yuan & Jian Wang & Jian Cheng & Daolin Zhu, 2022. "How Do the Different Types of Land Costs Affect Agricultural Crop-Planting Selections in China?," Land, MDPI, vol. 11(11), pages 1-18, October.
    11. Liu, Yan & Heerink, Nico & Li, Fan & Shi, Xiaoping, 2022. "Do agricultural machinery services promote village farmland rental markets? Theory and evidence from a case study in the North China plain," Land Use Policy, Elsevier, vol. 122(C).
    12. Jia, Lili, 2012. "Land fragmentation and off-farm labor supply in China," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 66, number 66.
    13. Ma, Xianlei & Heerink, Nico & van Ierland, Ekko & Lang, Hairu & Shi, Xiaoping, 2020. "Decisions by Chinese households regarding renting in arable land—The impact of tenure security perceptions and trust," China Economic Review, Elsevier, vol. 60(C).
    14. Li, Xinyi & Ito, Junichi, 2023. "Determinants of technical efficiency and farmers’ crop choice rationality: A case study of rural Gansu, China," Journal of Asian Economics, Elsevier, vol. 84(C).
    15. Licheng Xu & Xiaodong Du, 2022. "Land certification, rental market participation, and household welfare in rural China," Agricultural Economics, International Association of Agricultural Economists, vol. 53(1), pages 52-71, January.
    16. Xu, Licheng & Du, Xiaodong, 2020. "Land certification, rental market participation, and income dynamics in rural China," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304247, Agricultural and Applied Economics Association.
    17. L Rachel Ngai & Christopher A Pissarides & Jin Wang, 2019. "China’s Mobility Barriers and Employment Allocations," Journal of the European Economic Association, European Economic Association, vol. 17(5), pages 1617-1653.
    18. Jian Zhang & Ashok K. Mishra & Peixin Zhu, 2021. "Land rental markets and labor productivity: Evidence from rural China," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 69(1), pages 93-115, March.
    19. Lei Xu & Shixiang Chen & Shuliu Tian, 2022. "The Mechanism of Land Registration Program on Land Transfer in Rural China: Considering the Effects of Livelihood Security and Agricultural Management Incentives," Land, MDPI, vol. 11(8), pages 1-25, August.
    20. Wang, Hui & Riedinger, Jeffrey & Jin, Songqing, 2015. "Land documents, tenure security and land rental development: Panel evidence from China," China Economic Review, Elsevier, vol. 36(C), pages 220-235.

    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:eee:lauspo:v:109:y:2021:i:c:s0264837721003446. 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: Joice Jiang (email available below). General contact details of provider: https://www.journals.elsevier.com/land-use-policy .

    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.