IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v122y2023ics0264999323000603.html
   My bibliography  Save this article

Can land transfer relax credit constraints? Evidence from China

Author

Listed:
  • Chen, Conghui
  • Liu, Bing
  • Wang, Ziyou

Abstract

Although many studies have examined what drives credit constraints and their negative impact, evidence on the mechanism of relaxing credit constraints is scarce. This paper explores effective solutions to help households improve their access to credit. Using the China Family Panel Studies data from 2018, we employ an endogenous switching probit model to examine whether and to what extent land transfer can ease credit constraints. We find that households that transfer their land in or out are, respectively, 31.4% or 21.4% less credit constrained than those that do not. Participation in land transfers can improve borrowers’ financial situations through income increases and pledging assets as collateral, alleviating both formal and informal credit constraints. Our results suggest that any government initiatives to promote the efficiency of land transfer to ease credit constraints can help boost economic growth in China.

Suggested Citation

  • Chen, Conghui & Liu, Bing & Wang, Ziyou, 2023. "Can land transfer relax credit constraints? Evidence from China," Economic Modelling, Elsevier, vol. 122(C).
    • Handle: RePEc:eee:ecmode:v:122:y:2023:i:c:s0264999323000603
    DOI: 10.1016/j.econmod.2023.106248
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999323000603
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econmod.2023.106248?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. Yi Che, 2016. "Off-farm employments and land rental behavior: evidence from rural China," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 8(1), pages 37-54, February.
    2. Berger, Allen N. & Scott Frame, W. & Ioannidou, Vasso, 2011. "Tests of ex ante versus ex post theories of collateral using private and public information," Journal of Financial Economics, Elsevier, vol. 100(1), pages 85-97, April.
    3. Su, Baozhong & Li, Yuheng & Li, Lequn & Wang, Yue, 2018. "How does nonfarm employment stability influence farmers' farmland transfer decisions? Implications for China’s land use policy," Land Use Policy, Elsevier, vol. 74(C), pages 66-72.
    4. Edward Martey & Alexander N. Wiredu & Prince M. Etwire & John K.M. Kuwornu, 2019. "The impact of credit on the technical efficiency of maize-producing households in Northern Ghana," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 79(3), pages 304-322, May.
    5. Tongwei Qiu & Qinying He & S.T. Boris Choy & Yifei Li & Biliang Luo, 2020. "The impact of land renting-in on farm productivity: evidence from maize production in China," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 13(1), pages 78-95, September.
    6. Hu, Yue & Liu, Chang & Peng, Jiangang, 2021. "Financial inclusion and agricultural total factor productivity growth in China," Economic Modelling, Elsevier, vol. 96(C), pages 68-82.
    7. Zhang, Lan & Feng, Shuyi & Heerink, Nico & Qu, Futian & Kuyvenhoven, Arie, 2018. "How do land rental markets affect household income? Evidence from rural Jiangsu, P.R. China," Land Use Policy, Elsevier, vol. 74(C), pages 151-165.
    8. Tongwei Qiu & Qinying He & S.T. Boris Choy & Yifei Li & Biliang Luo, 2020. "The impact of land renting-in on farm productivity: evidence from maize production in China," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 13(1), pages 78-95, September.
    9. Yi Che, 2016. "Off-farm employments and land rental behavior: evidence from rural China," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 8(1), pages 37-54, February.
    10. 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.
    11. DeanS. Karlan, 2007. "Social connections and group banking," Economic Journal, Royal Economic Society, vol. 117(517), pages 52-84, February.
    12. Fei, Rilong & Lin, Ziyi & Chunga, Joseph, 2021. "How land transfer affects agricultural land use efficiency: Evidence from China’s agricultural sector," Land Use Policy, Elsevier, vol. 103(C).
    13. Turvey, Calum G. & Kong, Rong, 2010. "Informal lending amongst friends and relatives: Can microcredit compete in rural China?," China Economic Review, Elsevier, vol. 21(4), pages 544-556, December.
    14. Kaili Peng & Chen Yang & Yao Chen, 2020. "Land transfer in rural China: incentives, influencing factors and income effects," Applied Economics, Taylor & Francis Journals, vol. 52(50), pages 5477-5490, October.
    15. Menkhoff, Lukas & Neuberger, Doris & Rungruxsirivorn, Ornsiri, 2012. "Collateral and its substitutes in emerging markets’ lending," Journal of Banking & Finance, Elsevier, vol. 36(3), pages 817-834.
    16. Zou, Baoling & Mishra, Ashok K. & Luo, Biliang, 2018. "Aging population, farm succession, and farmland usage: Evidence from rural China," Land Use Policy, Elsevier, vol. 77(C), pages 437-445.
    17. Abbas Ali Chandio & Yuansheng Jiang, 2018. "Determinants of Credit Constraints: Evidence from Sindh, Pakistan," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(15), pages 3401-3410, December.
    18. Michael R. Carter & Pedro Olinto, 2003. "Getting Institutions “Right” for Whom? Credit Constraints and the Impact of Property Rights on the Quantity and Composition of Investment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(1), pages 173-186.
    19. Li, Rui & Li, Qinghai & Lv, Xiaofeng & Zhu, Xi, 2019. "The land rental of Chinese rural households and its welfare effects," China Economic Review, Elsevier, vol. 54(C), pages 204-217.
    20. Jordan Chamberlin & Jacob Ricker-Gilbert, 2016. "Participation in Rural Land Rental Markets in Sub-Saharan Africa: Who Benefits and by How Much? Evidence from Malawi and Zambia," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(5), pages 1507-1528.
    21. Pia Nilsson, 2019. "The Role of Land Use Consolidation in Improving Crop Yields among Farm Households in Rwanda," Journal of Development Studies, Taylor & Francis Journals, vol. 55(8), pages 1726-1740, August.
    22. Daniel Ayalew Ali & Klaus Deininger & Marguerite Duponchel, 2014. "Credit Constraints and Agricultural Productivity: Evidence from rural Rwanda," Journal of Development Studies, Taylor & Francis Journals, vol. 50(5), pages 649-665, May.
    23. Li, Changsheng & Ma, Wanglin & Mishra, Ashok K. & Gao, Liangliang, 2020. "Access to credit and farmland rental market participation: Evidence from rural China," China Economic Review, Elsevier, vol. 63(C).
    24. Nagler, Paula & Naudé, Wim, 2017. "Non-farm entrepreneurship in rural sub-Saharan Africa: New empirical evidence," Food Policy, Elsevier, vol. 67(C), pages 175-191.
    25. Catherine Guirkinger & Stephen R. Boucher, 2008. "Credit constraints and productivity in Peruvian agriculture," Agricultural Economics, International Association of Agricultural Economists, vol. 39(3), pages 295-308, November.
    26. Fengxia Dong & Jing Lu & Allen M. Featherstone, 2012. "Effects of credit constraints on household productivity in rural China," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 72(3), pages 402-415, November.
    27. Fengxia Dong & Jing Lu & Allen M. Featherstone, 2012. "Effects of credit constraints on household productivity in rural China," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 72(3), pages 402-415, November.
    28. Meishan Jiang & Jingrong Li & Krishna P. Paudel & Yunsheng Mi, 2019. "Factors affecting agricultural land transfer-out in China: a semiparametric instrumental variable model," Applied Economics Letters, Taylor & Francis Journals, vol. 26(20), pages 1729-1733, November.
    29. Varga, Mihai, 2020. "Poverty reduction through land transfers? The World Bank’s titling reforms and the making of “subsistence” agriculture," World Development, Elsevier, vol. 135(C).
    30. Stephen R. Boucher & Catherine Guirkinger & Carolina Trivelli, 2009. "Direct Elicitation of Credit Constraints: Conceptual and Practical Issues with an Application to Peruvian Agriculture," Economic Development and Cultural Change, University of Chicago Press, vol. 57(4), pages 609-640, July.
    31. Michael Lokshin & Zurab Sajaia, 2011. "Impact of interventions on discrete outcomes: Maximum likelihood estimation of the binary choice models with binary endogenous regressors," Stata Journal, StataCorp LP, vol. 11(3), pages 368-385, September.
    32. Li, Changsheng & Lin, Liqiong & Gan, Christopher E.C., 2016. "China credit constraints and rural households’ consumption expenditure," Finance Research Letters, Elsevier, vol. 19(C), pages 158-164.
    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. Yong Bian & Xiqian Wang & Qin Zhang, 2023. "How Does China's Household Portfolio Selection Vary with Financial Inclusion?," Papers 2311.01206, arXiv.org.
    2. Ziyang Zhou & Ziwei Li & Guangyan Chen & Jinpeng Zou & Mingling Du & Fang Wang, 2024. "Digital Literacy Level and Formal Credit Constraints: Probit Analysis of Farm Households’ Borrowing Behavior in China," Agriculture, MDPI, vol. 14(6), pages 1-20, May.

    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. Li, Changsheng & Ma, Wanglin & Mishra, Ashok K. & Gao, Liangliang, 2020. "Access to credit and farmland rental market participation: Evidence from rural China," China Economic Review, Elsevier, vol. 63(C).
    2. 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.
    3. Jianmei ZHAO & Jun ZHANG & Peter J. BARRY, 2014. "Do formal credit constraints affect the rural household consumption in China?," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 60(10), pages 458-468.
    4. Wenjing Han & Zhengfeng Zhang & Xiaoling Zhang & Li He, 2021. "Farmland Rental Participation, Agricultural Productivity, and Household Income: Evidence from Rural China," Land, MDPI, vol. 10(9), pages 1-22, August.
    5. Unal Seven & Semih Tumen, 2020. "Agricultural Credits And Agricultural Productivity: Cross-Country Evidence," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 65(supp01), pages 161-183, December.
    6. Anh, Nguyen Tuan & Gan, Christopher & Anh, Dao Le Trang, 2022. "Multi-market credit rationing: The determinants of and impacts on farm performance in Vietnam," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 159-173.
    7. Balana, Bedru B. & Mekonnen, Dawit & Haile, Beliyou & Hagos, Fitsum & Yimam, Seid & Ringler, Claudia, 2022. "Demand and supply constraints of credit in smallholder farming: Evidence from Ethiopia and Tanzania," World Development, Elsevier, vol. 159(C).
    8. Porgo, Mohamed & Kuwornu, John K.M. & Zahonogo, Pam & Jatoe, John Baptist D. & Egyir, Irene S., 2018. "Credit constraints and cropland allocation decisions in rural Burkina Faso," Land Use Policy, Elsevier, vol. 70(C), pages 666-674.
    9. Gang Li & Xufeng Cui & Lan Pan & Yufei Wang, 2023. "Land Transfer and Rural Household Consumption Diversity: Promoting or Inhibiting?," Land, MDPI, vol. 12(1), pages 1-16, January.
    10. Balana, Bedru & Oyeyemi, Motunrayo, 2021. "Credit Constraints and Adoption of Agricultural Technologies in Developing Countries? Evidence from Nigeria," 2021 Conference, August 17-31, 2021, Virtual 315347, International Association of Agricultural Economists.
    11. Liqiong Lin & Weizhuo Wang & Christopher Gan & David A. Cohen & Quang T.T Nguyen, 2019. "Rural Credit Constraint and Informal Rural Credit Accessibility in China," Sustainability, MDPI, vol. 11(7), pages 1-20, April.
    12. Haibo Lei & Qin Su, 2023. "Does the Use of Digital Finance Affect Household Farmland Transfer-Out?," Sustainability, MDPI, vol. 15(16), pages 1-18, August.
    13. Liqiong Lin & Weizhuo Wang & Christopher Gan & Quang T. T. Nguyen, 2019. "Credit Constraints on Farm Household Welfare in Rural China: Evidence from Fujian Province," Sustainability, MDPI, vol. 11(11), pages 1-19, June.
    14. Weiguo Fan & Wei Yao & Kehan Chen, 2023. "Integrating Energy Systems Language and Emergy Approach to Simulate and Analyze the Energy Flow Process of Land Transfer," Land, MDPI, vol. 12(5), pages 1-24, May.
    15. Martinson Ankrah Twumasi & Hongyun Zheng & Love Offeibea Asiedu-Ayeh & Anthony Siaw & Yuansheng Jiang, 2023. "Access to Financial Services and Its Impact on Household Income: Evidence from Rural Ghana," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 35(4), pages 869-890, August.
    16. Danny Cyra Yangchen & Mingyong Hong & Qisong Yang, 2022. "The Effect of Farmland Transfer on the Technical Efficiency of Farm Households in China: An Empirical Result of External Environmental Factors," Land, MDPI, vol. 12(1), pages 1-22, December.
    17. 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).
    18. Turvey, C. G., 2017. "IFAD RESEARCH SERIES 10 - Inclusive finance and inclusive rural transformation," IFAD Research Series 280048, International Fund for Agricultural Development (IFAD).
    19. Diana Fletschner & Catherine Guirkinger & Steve Boucher, 2010. "Risk, Credit Constraints and Financial Efficiency in Peruvian Agriculture," Journal of Development Studies, Taylor & Francis Journals, vol. 46(6), pages 981-1002.
    20. Xiaolin Guo & Guanming Shi & Linyi Zheng & Wenrong Qian, 2022. "How Does the Land Rental Market Participation Affect Household Efficiency? Evidence from Rural China," IJERPH, MDPI, vol. 19(23), pages 1-14, December.

    More about this item

    Keywords

    Land transfer; Credit constraints; Collateral and income mechanism;
    All these keywords.

    JEL classification:

    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land

    Statistics

    Access and download statistics

    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:ecmode:v:122:y:2023:i:c:s0264999323000603. 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    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.