۱- Introduction

۲- Background

۳- Theoretical Framework

۴- Econometric model

۵- Data

۶- Results and discussion

۷- Conclusion and policy implications

References

Abstract

This study investigates the factors affecting farmland rental prices in China. Special emphasis is put on the capitalization of China’s grain subsidy program into land rental rates. Using national representative farm-level data, Heckman sample selection model, and quantile regression (QR) approach, we find that a 10% increase in grain subsidy payments for contracted farmland increases the farmland rental price by about 1%. However, quantile regression results show that the capitalization rate is heterogeneous and varies across the distribution. Findings suggest that family labor input and farm location are important factors driving up farmland rental prices. Moreover, for farm size, rental experience, and natural disaster we detect a negative impact on land rental prices.

Introduction

To promote grain production, ensure food security, and improve rural household income, China’s government implemented a national grain subsidy program in 2004 (Yi et al., 2015). Since its inception, the program’s size has increased continuously (Huang et al., 2013), and the program accounted for 22% of the government’s annual agricultural and environmental expenditures in 2014 (Yi and McCarl, 2018). The government initially designed the grain subsidy program (GSP) to increase grain production and to ensure national food security. Thus, researchers focused their efforts on estimating the effects of GSP on agricultural output and rural livelihoods. For instance, Tan et al. (2006) using micro survey data found that the direct grain subsidy has had a modest impact on farmers’ income and has reduced income inequality in villages. However, Huang et al. (2011) detected that grain subsidies have no impact on grain production and demand for production inputs. In a recent study, Huang and Yang (2017) stated that the grain subsidy’s impact on farmers’ income was negligible because the size of the subsidy per farmer was minimal. While there has recently been ample research on developments in land use and rural adjustments in China (e.g. Zhang et al., 2019; Liu et al., 2018; Liu, 2018; Yang et al., 2018; Liu and Li, 2017; Liu et al., 2014; Li et al., 2014; Wang et al., 2013), no study has examined China’s GSP from the perspective of human-land relationships, or specifically rural households’ land rental activities (e.g., farmland rental behavior, farmland rental prices). During the transition of China’s production mode and land use pattern, the farmland rental market is believed to be an essential channel in solving land fragmentation and small-scale nature of Chinese farms (Zhou et al., 2019).