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Farmland lease, high-rent threat and contract instability: evidence from China

Wenjue Zhu (School of Economics and Trade, Guangdong University of Foreign Studies, Guangzhou, China)
Krishna P. Paudel (Department of Agricultural Economics and Agribusiness, Louisiana State University (LSU) and LSU Agricultural Center, Baton Rouge, Louisiana, USA)
Sean Inoue (Department of Economics, Colgate University, Hamilton, New York, USA)
Biliang Luo (National School of Agricultural Institution and Development, South China Agricultural University, Guangzhou, China)

China Agricultural Economic Review

ISSN: 1756-137X

Article publication date: 2 July 2021

Issue publication date: 19 October 2021

199

Abstract

Purpose

The purpose is to understand why contract instability occurs when small landowners lease their land to large landholders.

Design/methodology/approach

The authors develop a contract theoretical model to understand the stability problem in the farmland lease contract in China, where most landowners are small landholders.

Findings

Results from the doubly robust estimation method used on randomly selected interview data from 552 households in nine provinces of China indicate that contract instability can arise endogenously when large landholders sign a contract. The authors conclude that a suitable rent control regime or contract enforcement may be necessary to promote a large-scale farmland transfer in China.

Originality/value

The authors develop a contract theoretical model and apply it to the land rental market in China. Data used are original and collected from farmers located in nine provinces of China.

Keywords

Acknowledgements

Funding: Zhu’s time on this paper was supported by the National Natural Science Foundation of China (No. 71903038). Luo’s time on this paper was supported by the National Social Science Foundation of China (No. 19ZDA115). Paudel’s time on this paper was supported by the USDA Hatch Projects #94483 and #94382.

Citation

Zhu, W., Paudel, K.P., Inoue, S. and Luo, B. (2021), "Farmland lease, high-rent threat and contract instability: evidence from China", China Agricultural Economic Review, Vol. 13 No. 4, pp. 799-831. https://doi.org/10.1108/CAER-06-2020-0142

Publisher

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Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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