Farmers' decision-making regarding land under economic incentives: Evidence from rural China

Abstract

To achieve complete urbanization in developing countries, it is essential for many farmers to leave rural areas and withdraw from farmland as they enter urban employment. The Chinese government offers economic incentives to encourage households to relinquish their land rights. Based on a survey data in rural China, this paper examines the impact of land transfers and urban housing on the withdrawal of contractual rights of farm households. Econometric analyses reveal that rural households with urban housing are 6.4 % less likely to choose to withdraw from land, whereas those involved in land transfers are 3.8 % more likely to do so. The study's findings suggest that a uniform policy, like nationwide land withdrawal reforms accompanied by economic compensation, might lead to outcomes where the poor lose land and the rich retain theirs.