Market-oriented land rentals in the less-developed regions of China

ABSTRACT

Using data from southwest China to investigate the marketization of land rentals, we find no difference in land rents for different types of transaction partners after accounting for endogeneity, even though relation-oriented rental transactions are popular in less-developed regions. Further analysis shows that oral contracts are more common in land rentals between kins or between farm households within the village. After excluding rent-free transactions, the land rents between kins are 677.143 yuan/mu per year on average. Our findings imply that both blood relation and regional relation do not impair the functioning of the market in today’s China.

KEYWORDS:

• Land rent
• transfer contract
• land rentals
• marketization

JEL CLASSIFICATION:

• O13
• Q13
• Q15

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Marketization is a restructuring process whereby state enterprises operate as market-oriented firms. The marketization of land rentals in this paper represents the status changing from relation-based transactions to market-oriented transactions. Price is used to measure the marketization of land rentals because the market functions through pricing (Kreps 2013), and relation-based or informal land rentals are always accompanied by low land rents (Ma 2013; Wang, Riedinger, and Jin 2015). With the increase of land rents, market orientation will dominate relation orientation. Additionally, written contract is also suggested to represent the formality of land rentals (Wang, Riedinger, and Jin 2015).

² It should be noted that the natural logarithm of land rent represents the growth rate of land rent rather than the absolute value of land rent. For this reason, we also use the absolute value of land rent (unit: hundred yuan/mu per year) to serve as the dependent variable, and the results are similar to those in Table 3. Due to word limit, the estimated results are not reported.

Additional information

Funding

This work was supported by the major project of National Social Science Foundation of China [19ZDA115].