Land Tenure Arrangements, Factor Market Development and Agricultural Production

As a result of over three decades of economic reform, China has made rapid progress in increasing agricultural productivity and farmer incomes and alleviating rural poverty. However, agricultural productivity and rural industrial growth have slowed in recent years, and the income disparity between rural and urban households has widened rapidly. Future increases in agricultural productivity and rural incomes and a reduction of the rural-urban income gap are likely to depend on further structural change of the economy and within the agricultural sector.This means a smooth movement of labor out of the agricultural sector and land transfer to productive farmers who are able to achieve economy of scale. However, institutional factors still pose enormous challenges to the free movement of both labor and land resources. This study analyzes how one of these institutions, the land tenure arrangement, affects market-based land and labor transfer and agricultural production. It uses data collected in Henan province in central China and employs several econometric approaches. Important results include a finding that land tenure security and land transferability are incentives for household off-farm labor market and land rental market participation, while migration could facilitate land rental market development by increasing land rental supply,furthermore, the development of land rental markets improves the efficiency of land allocation, agricultural productivity, as well as technical efficiency. Based on the findings, the author recommends a set of policies oriented towards stimulating household off-farm employment and land rental market participation in the study area.