The Impact of Farmland Transfers on Agricultural Investment in China: A Perspective of Transaction Cost Economics. Issue 1 (15th January 2019)

• Record Type: Journal Article
• Authors: Gao, Liangliang; Sun, Dingqiang; Ma, Cuiping
• Is Part Of: China & world economy. Volume 27:Issue 1(2019)
• Page Start: 93
• Page End: 109
• Publication Date: 2019-01-15
• Subjects: agricultural investment -- farmland rental market -- governance structure -- transaction cost economics; D23 -- Q12 -- Q15; Economic indicators -- China -- Periodicals; China -- Economic conditions -- 1976- -- Periodicals; China -- Economic policy -- 1976- -- Periodicals; China -- Commerce -- Periodicals; Economics -- China -- Periodicals; 337.951
• DOI: 10.1111/cwe.12269
• Languages: English
• ISSNs: 1671-2234

Abstract

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.