Reforming land mortgages in rural China and the incentives for application of environment-friendly formula fertilizers on farm

Abstract

Purpose

From the perspective of land mortgages, the purpose of this paper is to understand how farmers can be motivated to utilize environment-friendly formula fertilizers, thereby reducing the use of chemical fertilizers.

Design/methodology/approach

Two hypotheses are empirically tested using questionnaire responses from 714 farmers across three provinces in China to establish the relationship and to determine the role land rent plays.

Findings

This study finds that farmers who obtain land mortgages will be more willing to apply formula fertilizers in order to obtain higher value of their “own” land. This is because obtaining land mortgages can be considered as the process of titling land management rights. Farmers who have been transferred the land by verbal agreement no longer need to worry about losing it at any time. Hence, they are willing to apply formula fertilizers on their transferred land. Similarly, farmers who have been transferred the land by written contract to obtain more land mortgages will also be willing because the formula fertilizers can not only improve the quality of their transferred land, but also increase its value as collateral. This mechanism is clearer in the area where the average land rent is relatively lower.

Originality/value

No study has yet linked the reform of land mortgages to environmentally friendly behavior. While other studies have focused on the way access to credit changes farmer investments and spending, this particular relationship has not yet been formalized, giving this study theoretical and empirical significance.

Citation

Peng, P. and Zhou, L. (2021), "Reforming land mortgages in rural China and the incentives for application of environment-friendly formula fertilizers on farm", Agricultural Finance Review, Vol. 81 No. 5, pp. 617-635. https://doi.org/10.1108/AFR-03-2019-0026