1. 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

2. 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)

3. 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)

4. 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

5. 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

6. 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)

7. 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)

8. 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

9. 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

10. 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

11. 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

12. 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

13. Thanks for your attention！