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The Impact of Farmland Transfers on Agricultural Investment in China: A Perspective of Transaction Cost Economics

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  • Liangliang Gao
  • Dingqiang Sun
  • Cuiping Ma

Abstract

There is growing concern that farmland transfers lead to less agricultural investment, which may adversely affect agricultural productivity growth in China. Prior research has primarily focused on the differences between owned cultivated land and rented plots, but little is known about how farmland transfers between relatives, which are popular in rural China, specifically affect agricultural investment. In this paper, we present a conceptual framework of transaction cost economics to compare different contracting strategies in China's farmland rental markets. As farmland rental markets in China are immature, land transfer between relatives establishes bilateral governance, which has the advantage of addressing the opportunistic activities of both parties and can ultimately increase investment by tenants. Based on data from two waves of household surveys, we empirically examine the impact of bilateral governance on the application of organic fertilizer, an indicator for agricultural investment. Our findings show that apart from economic factors, kinship is important to the functioning of farmland rental markets in rural areas.

Suggested Citation

  • Liangliang Gao & Dingqiang Sun & Cuiping Ma, 2019. "The Impact of Farmland Transfers on Agricultural Investment in China: A Perspective of Transaction Cost Economics," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 27(1), pages 93-109, January.
    • Handle: RePEc:bla:chinae:v:27:y:2019:i:1:p:93-109
    DOI: 10.1111/cwe.12269
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    References listed on IDEAS

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    Cited by:

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    3. Wen, Lanjiao & Yang, Shenjie & Qi, Mengna & Zhang, Anlu, 2024. "How does China’s rural collective commercialized land market run? New evidence from 26 pilot areas, China," Land Use Policy, Elsevier, vol. 136(C).
    4. Zhang, Yuanxia & Halder, Pradipta & Zhang, Xiaoning & Qu, Mei, 2020. "Analyzing the deviation between farmers' Land transfer intention and behavior in China's impoverished mountainous Area: A Logistic-ISM model approach," Land Use Policy, Elsevier, vol. 94(C).
    5. Lijuan Xu & Abbas Ali Chandio & Jingyi Wang & Yuansheng Jiang, 2022. "Does Farmland Tenancy Improve Household Asset Allocation? Evidence from Rural China," Land, MDPI, vol. 12(1), pages 1-22, December.
    6. Yinrong Chen & Yanqing Qin & Qingying Zhu, 2023. "Study on the Impact of Social Capital on Agricultural Land Transfer Decision: Based on 1017 Questionnaires in Hubei Province," Land, MDPI, vol. 12(4), pages 1-22, April.
    7. Lili Chen & Jiquan Peng & Yibei Zhang, 2022. "Research on the Impact of Rural Land Transfer on Non-Farm Employment of Farm Households: Evidence from Hubei Province, China," IJERPH, MDPI, vol. 19(23), pages 1-19, November.
    8. Chaozhu Li & Xiaoliang Li & Jiaxu Wang & Tianchu Feng, 2023. "Impacts of Aging Agricultural Labor Force on Land Transfer: An Empirical Analysis Based on the China Family Panel Studies," Land, MDPI, vol. 12(2), pages 1-15, January.
    9. Hua Zhang & Qiwang Zhang & Man An & Zixuan Zhang & Nanqiao He, 2023. "Unveiling the Impact of Digital Financial Inclusion on Low-Carbon Green Utilization of Farmland: The Roles of Farmland Transfer and Management Scale," Sustainability, MDPI, vol. 15(4), pages 1-20, February.
    10. Xu, Mingjun & Chen, Changling & Ahmed, Memon Aftab, 2024. "Market-oriented farmland transfer and outsourced machinery services: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 1214-1226.
    11. Tongwei Qiu & Biliang Luo & Qinying He, 2020. "Does Land Rent between Acquaintances Deviate from the Reference Point? Evidence from Rural China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 28(3), pages 29-50, May.
    12. Cheng, Qingyue & Li, Liangyu & Liao, Qin & Fu, Hao & Nie, Jiangxia & Luo, Yongheng & Wang, Zhonglin & Yin, Huilai & Shu, Chuanhai & Chen, Zongkui & Sun, Yongjian & Ma, Jun & Li, Na & Yang, Zhiyuan, 2023. "Is scale production more advantageous than smallholders for Chinese rice production?," Energy, Elsevier, vol. 283(C).
    13. Jia Gao & Rongrong Zhao & Xiao Lyu, 2022. "Is There Herd Effect in Farmers’ Land Transfer Behavior?," Land, MDPI, vol. 11(12), pages 1-15, December.
    14. Meseret Abatechanie & Baozhong Cai & Fang Shi & Yuanji Huang, 2022. "The Environmental and Socio-Economic Effect of Farmland Management Right Transfer in China: A Systematic Review," Land, MDPI, vol. 11(8), pages 1-21, August.
    15. Lian Ke & Shan Cheng & Diqiang Chen & Ying Li, 2023. "Why Is the Income Effect of Farmland Transfer Inconsistent between Transferred-Out and Transferred-In Households?," Sustainability, MDPI, vol. 15(9), pages 1-19, April.
    16. Yahui Wang & Liangjie Xin & Haozhe Zhang & Yuanqing Li, 2019. "An Estimation of the Extent of Rent-Free Farmland Transfer and Its Driving Forces in Rural China: A Multilevel Logit Model Analysis," Sustainability, MDPI, vol. 11(11), pages 1-18, June.

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