The Structure of Income, Factor prices, and Farmland Leasing

邓智团; Jiaojiao Kang

doi:10.21203/rs.3.rs-10772461/v1

The Structure of Income, Factor prices, and Farmland Leasing | ResearchHub

Abstract Land is a critical factor asset for farmers. In the context of agricultural and rural modernization, the optimal allocation of land factors has become key to increasing farmers' income and a primary means of endowing farmers with more substantial property rights. This paper theoretically explores the relationship between farmers' household income structure and land rental behavior, and empirically tests this relationship using data from the 2013 and 2018 China Thousand-Village Surveys. The findings are as follows. First, with the intersectoral and interregional mobility of labor, wage income in farm households has increased, and agricultural production is no longer the dominant source of income. Farmers are progressively transitioning into nonfarm households and part-time farming households. Second, as the income structure shifts, the productive function of land diminishes for nonfarm and part-time farming households, while its property function gains prominence. An increasing number of farmers are more willing to lease out their land to obtain rental income. In this process, land transitions from a factor of production to an interest-bearing asset, with rent representing the dividend from holding such an asset. Third, relative factor prices have undergone substantial changes: the prices of capital relative to labor and land relative to labor have declined. Rational farm households tend to reallocate their household factor endowments, manifesting as an accelerated transfer of labor out of agriculture. Further discussion reveals that the effect of income structure change on land rental supply is more pronounced in plain areas and among households enrolled in the New Cooperative Medical Scheme. Concurrently, as the income structure evolves, the "production factor" function of land progressively weakens, while its nature as an "interest-bearing asset" becomes increasingly salient, exhibiting a clear tendency to transition from the former to the latter. Clarifying this transformation and leveraging the property function of land can effectively prevent declines in agricultural productivity and land abandonment, which is of great significance for both increasing farmers' incomes and advancing agricultural modernization.

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