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An Analysis of China s Reforms on Mortgaging and Transacting Rural Land Use Rights and Entrepreneurial Activity

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  • Peng, Y.
  • Turvey, C.
  • Kong, R.

Abstract

This paper aims to determine, how providing the right of collateral to LUR might change farmers investment behavior and incentivize entrepreneurial activity. To achieve this objective, we try to solve two issues. The first issue of economic importance is in understanding the market value of LUR transactions; creating now a tradable asset from one which held value but no market. To examine this we build an argument around the idea of economic and marginal rents from Ricardo. The second issue relates to the extent by which deepening the rural financial landscape by allowing the mortgaging of LUR will promote and advance much needed entrepreneurial activity. To explore this issue we draw on Schumpeter. Then, based on a survey of 1,465 farm households in rural China and an endogenous 2SLS model. We find that a positive and significant relationship between a willingness to mortgage LUR and entrepreneurship, which suggest that the new policy may well meet that objective. However, we do not find that that entrepreneurs alone will have a willingness to mortgage LUR; non-entrepreneurs traditional farmer types- would also be willing to mortgage LUR, but with a caveat that either group already has a disposition or demand for credit. Acknowledgement : Funding for this research from the China National Nature Science Fund with ratification number 71373205.

Suggested Citation

  • Peng, Y. & Turvey, C. & Kong, R., 2018. "An Analysis of China s Reforms on Mortgaging and Transacting Rural Land Use Rights and Entrepreneurial Activity," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277308, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae18:277308
    DOI: 10.22004/ag.econ.277308
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