The potential of land rental markets in the process of economic development: Evidence from China |
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| Affiliation: | 1. Nanjing Agricultural University, China;2. Nanjing Audit University, China;1. Department of Economics, 458 W. Circle Drive, Michigan State University, East Lansing, MI 48824, United States;2. Department of Agriculture, Food and Resource Economics at Michigan State University, 458 W. Circle Drive, Michigan State University, East Lansing, Michigan, 48824;3. Office of Global Affairs, University of Washington, Box 351237, Seattle, WA 98195, United States;4. Department of Agriculture, Food and Resource Economics, at Michigan State University, 211F Morrill Hall of Agriculture, Michigan State University, East Lansing, MI 48824, United States;1. College of Public Administration, Nanjing Agricultural University, Nanjing, China;2. Department of Social Sciences, Wageningen University, Wageningen, the Netherlands;3. Agricultural and Resource Economics, University of California, Davis, United States of America |
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| Abstract: | We develop a model of land leasing with agents characterized by unobserved heterogeneity in ability and presence of an off-farm labor market. In this case, decentralized land rental may contribute to equity and efficiency goals and may have several advantages over administrative reallocation. The extent to which this is true empirically is explored using data from three of China's poorest provinces. Land rental markets and administrative reallocation reallocate land to those with lower endowments but the former are more effective in doing so and have a bigger productivity-enhancing effect. Information on hypothetical market participation suggests that reducing transaction costs in land rental markets could help to realize significant additional productivity gains. |
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