Annual World Bank Conference on Land and Poverty, Washington DC, March 20-24, 2017 How do land rental markets affect household income? Evidence from rural Jiangsu, P.R. China Lan Zhang1, Shuyi Feng1, Nico Heerink1,2, Futian Qu1, Arie Kuyvenhoven1,2 1 Nanjing Agricultural University, China 2 Wageningen University, The Netherlands

Introduction Theory Well-functioning land rental markets: Allow households with higher agricultural ability & less off-farm job opportunities to rent in land & expand farm operation → farm income Allow households that are less efficient in agricultural production & more successful in off-farm employment to rent out land & engage in off-farm activities →off-farm income Hence: Contribute to equity (i.e. reduced inequality of rural incomes)

Introduction In reality Factor market imperfections (credit, labor, etc.) land poor but more efficient households could not enlarge their farm size labor abundant but less efficient households could not access off-farm jobs Contracting by enterprises & cooperatives requires joint decision making (village committee) Impact on equity of rural household incomes: Empirical matter (can be positive or negative)

Introduction Land rental markets in China (policy) consolidate small plots into sufficient large size 0.38 hectare per farm household in 2013 increase rural household income Per capita net income of rural households: 1/3 of Per capita disposable income of urban households in 2013

Introduction Land rental market in China Rapid development in recent years From 4.8% (2007) to 30.4% (2014) of arable land area (MoA data) Contractors (2013): Farmers: 60.3%, Professional cooperatives: 20.4%, Enterprises: 9.4%, Other: 9.9% Does this rapid development contribute to equity of rural household incomes? Contributions Taking into account of the possible differentiated income effects of participation in land rental markets Taking into account of the endogeneity of land rental market participation

Empirical evidence: Jiangsu Province GDP pc: More than 2 x national average Major regional differences (N ⇮ S) Rented / arable land area is 58% (2014) Rural household survey: Stratified sample: 1,082 households from 128 villages in 11 prefecture-level cities Data collected for year 2012 (in 2013/14)

Empirical evidence: Jiangsu Province Sample characteristics Some migrant households could not be interviewed Household often lease land from > 1 household Rental price paid by enterprises (& coops) much higher than paid by households Renting-out Renting-in Share of households (%) 17.8 21.5 Average rented area (mua) 3.5 7.4 Average land rental price (yuanb/mu) 642 209 a: 15 mu = 1 ha; b 1 US$ ≈ 6.23 Yuan (December 31, 2012)

Empirical evidence: Jiangsu Province Income levels per sub-group (yuan) Off-farm income is 86% of total income, public transfers only 0.8% (whole sample) Households renting-in land have higher incomes than autarkic households No significant differences are found in off-farm incomes Rent-out Autarkic Rent-in Total household income 77,452 71,709 80,154* Farm income 5,551** 8,065 17,359*** Off-farm income 71,403 63,074 61,982 Public transfers 498** 570 813*** *,**,*** = significantly different from ‘Autarkic’ sub-group at at 10%-, 5%-, 1%-level

Regression results Regression model (to take other factors into account): Household income regressed on: Land renting in (dummy) Land renting out (dummy) Contracted land area per adult Other household assets & household characteristics Similar regressions for farm income, off-farm income & public transfers Endogeneity of land renting decision: Bivariate probit model for explaining renting in & renting out Estimated probabilities used as IV in income models

Total household income Regression results Regression results for household income (ln): Land renting Total household incomes of renting-in households increase, but not the incomes of renting-out households! (Renting out is often a joint decision (?) , households may be forced to rent out) Farm income of renting-out households does not significantly decline (Rent = net revenue loss ) Off-farm income not significantly affected by land renting (Off-farm employment is universal. Combination of farming & local off-farm employment popular in Jiangsu) Public transfers negatively affected by renting out (Underestimated by rich households (?) , capitalized into land rent(?)) Explanatory variable Total household income Farm income Off-farm Public transfers Rent out -0.263 (-1.43) -0.062 (-0.25) -0.287 (-1.25) -0.335** (-1.81) Rent in 0.472* (1.71) 0.963*** (2.67) 0.406 (1.17) 0.064 (0.27) t-values between brackets *,**,*** = significant at 10%-, 5%-, 1%-level

Regression results Quantile regression results for total household income Poorest renting-in households have highest income gain Share of farm income for these households are high Explanatory variable Quantiles 0.10 0.25 0.50 0.75 0.90 Rent out -0.338 (-0.99) -0.220 (-0.67) -0.124 (-0.50) -0.329 (-1.51) -0.396 (-1.22) Rent in 1.207** (2.26) 0.670* (1.74) 0.315 (0.92) 0.408 (1.21) 0.061 (0.15) t-values between brackets *,**,*** = significant at 10%-, 5%-, 1%-level

Conclusions Only renting-in households gain income, not renting-out households The poorest group, autarkic households, does not benefit from land rentals at present If land is rented out to enterprises or professional cooperatives: Income gain of, especially poorest, renting-in households is lost Hence, contribution to reducing rural-urban inequality & poverty is less

Thanks for your attention！