Does land tenure security increase the marketization of land rentals between acquaintances?

ABSTRACT

Using data from the 2015 China Household Finance Survey, we find that secure land tenure reduces informal land rentals between acquaintances. Additionally, secure land tenure increases land rent even when rental transactions are conducted between acquaintances. Our analysis suggests that although the land transfer rate in China is currently barely increasing, stabilizing land tenure can increase the marketization of rental transactions between acquaintances and activate land rental markets.

KEYWORDS:

• Land rentals
• land tenure
• acquaintance
• marketization

JEL CLASSIFICATION:

• O13
• Q13
• Q15

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Signing written contract is also regarded as a symbol of formal or market-oriented land rentals by the literature. However, no researches show that transactions without contracts are inevitably non-market transactions. This is because social relationship can substitute the function of contracts in the market transaction like Japan’s automobile industry (Qiu et al. 2020b, 2020c).

² Land contracts and land certificates are distributed by village collectives and governments, respectively. The former represent actual land tenure, and the latter represent legal land tenure. Clearly, actual land tenure has a more direct impact on farmers’ behaviour (Ma et al. 2013).

³ Another issue resulting in endogeneity problem is sample selection bias. In essence, the sample selection bias caused by factors determining the land renting-out of farmers results in the problem of omitting important variables. We argue that the IV used can also deal with this issue because the village-level land tenure security has been used to serve as the IV for land rentals by Liu et al. (2018).

⁴ It should be noted that the quality of land plot may matter in determining land rents because poorer-quality agricultural plots with better transportation may be transferred at lower rents. However, we argue that missing the quality of land plot does not matter because individual’s quality of land plot cannot affect the distribution of land contracts at the village level, i.e. missing the quality of land plot will not result in endogeneity problem in the estimation.

⁵ Additionally, we also used a Tobit regression model to analyse the land rent, and the results are similar to those using an extended linear regression model.

Additional information

Funding

This work was supported by the National Social Science Foundation of China [20FGLA004].