What Affects Participation in the Farmland Rental Market in Rural China? Evidence from CHARLS

Land fragmentation and the small size of land parcels are still the major bottlenecks for agriculture sustainable development in rural China, and an efficient land rental market could consolidate land plots and realize agricultural management at a moderate scale. However, transaction cost is still the main obstacle of land transfer. It is, therefore, essential to reduce the excessive transaction costs in the process of transfer; the primary task is to identify the roots of transaction costs. In order to accurately identify the sources of transaction costs, a generalized ordered Logit model with thresholds that allowed transaction costs to affect different directions of land transfer was developed using the China Health and Retirement Longitudinal Survey in 2015. The results suggested that the roots of transaction costs presented significant differences regarding the supply and demand of cropland. For the supply of land, the land titling program, land transfer intermediaries, and well-planned roads were the three most important factors that reduced transaction costs. For the demand of land, the three critical measures for reducing the transaction costs were well-planned roads, land consolidation, and the land titling program. The government should continue to push forward the land titling program and land consolidation projects in rural China, especially in hilly and mountainous areas. The infrastructure that greatly restricted agricultural development should be improved at a moderate level and the system of land circulating intermediary services at the township level should be established.