Study On The Impact Of The Current Farmland Tenure On Agricultural Production Performance

As the world's largest developing economy, since the second half of the 1990s onwards, China's long-term food prospects and sustainable use of natural resources in rural area have been receiving a wide attention. Advanced agricultural technologies and effective institutional changes have been considered as one of the most important means promoting agricultural growth and sustainability of natural resources use, in particular, a farmland tenure system as the core one. Therefore, whether a farmland tenure system is perfect has a significant impact on sustainable development in terms of social, economic and ecological aspects in China.Up to date, massive literature has explored land property rights issues in China as well as other countries, and thus, the study on the relationship between farmland tenure and agricultural production performance is absolutely not a new area. However, the exploration about it has never suspended in the practical and scientific fields in the past decades because of its extreme importance to sustainable development in the rural area as well as the urban area. The previous research, by and large, decomposes farmland tenure into farmland tenure security and transferability, and examines the impact of both aspects on land-related investments, land rental markets and agricultural production. The literature provides further research with a valuable methodological basis, whereas, very little has been focused on the micro-mechanism of the impact of farmland tenure on land-related investments and land rental markets. In addition, a large body of literature has examined the impact of the previous farmland tenure on land-related investments, land rental markets and agricultural production, very little research, to my knowledge, has been done to examine the impact of the present farmland tenure. The farmland tenure at present is characterized by relatively high transferability and low security. More specific, on the one hand, the frequent land readjustments happened in the past have still influenced the perception of farmers on the future land readjustment and tenure security, and thus, land readjustments never ceased up to date. On the other hand, the land tenure certificates indicating high security of farmland tenure have not been widely handed out to farmers, and some of the certificates issued are also not in line with the concerning laws and regulations. Therefore it provides a valuable research space for examining the impact of the present farmland tenure on land-related investments, land rental markets and agricultural production.The farmland tenure reforms mainly focused on expansion of farmland tenure function and extension of farmland tenure period on the basis of the household responsibility system in the past decades. To specify, the farmland tenure reform, on the one hand, gradually allowed farmers to transfer land on land rental market, on the other hand, prolonged the period of land contracts from 15 years to 30 years, and gradually narrowed the scope of land readjustments. The main aim of these reforms is to enhance farmland tenure security and transferability, and provide farmers with more individual-right tenure. However, these reforms did not obtain the expected results for policy-makers. In the process of the reforms, the contradiction between farmland tenure security and land readjustments and the tardiness of formal land rental market development are the two major problems which are confronted with policy-makers. Despite of a lot of complicated causes for the two problems, the expansion of the impact of farmland tenure insecurity which results from the presence of land social security function contributes a lot to the two problems.The major analysis structure which guides the whole thesis is called analysis framework—theoretical model—empirical model. This structure indicates that the thesis, firstly, establishes an analysis framework which abstracts the intrinsic relationship between farmland tenure and agricultural production performance, and points out land-related investment incentive and land market allocation efficiency are the two key factors linking farmland tenure and agricultural production performance. Then, it establishes theoretical models to put forward with the hypothesis about the impact of farmland tenure on land-related investment and land market. Finally, it tests the theoretical hypothesis with the empirical models.The first part of the main body of the thesis employs the investment-decision theory widely used in the firm field to explore the micro-mechanism of the impact of farmland tenure on land-related investment, and examines the theoretical hypothesis. The conclusion is twofold. For one thing, it indicates that farmers are associated their short-term investment decisions with the traditional net present value (NPV) conception, and thus, the farmland tenure security at present does not encourage farmers to make short-term investments on farmland. For another thing, it shows that farmers determine whether to make long-term investments according to the real option value conception because of the distinct uncertainty and irreversibility of long-term investments. Therefore, the farmland tenure security at present does encourage farmers to make long-term investments on farmland.The second part of the main body of the thesis uses the basic household model and transaction cost theory to explore the micro-mechanism of the impact of farmland tenure on land rental market development, and examines the theoretical hypothesis. This part also arrives at a two-fold conclusion. On the one hand, farmers may jointly participate in land renting-in market and off-farm employment market, the decrease in the number of land readjustment and increase in ratio of farmland tenure certificate issue can prompt farmers who are on the edge of of land rent-in markets to go inside of land rental markets, and farmers who have already rented in land to rent in more land. On the other hand, farmers' participation in land renting-out market and off-farm employment market may not be joint, because land social security function preventing farmers renting out land eventhough they have engaged in off-farm work. But the increase in ratio of farmland tenure certificate issue can also encourage farmers who are on the edge of land rent-out markets to go inside markets, and farmers who have already rented out land to rent out more land.Empirical examination on the impact of the present farmland tenure on agricultural production performance is focused on the third part of the main body of the thesis. On the one hand, the conclusion suggests that the investment incentive effect of the present farmland tenure security on both land production capacity and labor production capacity is minor. The potential reason is that the high uncertainty of agricultural production prompts farmers to replace long-term investments by short-term ones, which weakens the effect of long-term investments on land production capacity and labor production capacity. On the other hand, although the market allocation effect of the present farmland tenure security on land production capacity is moderate, it is significant on labor production capacity. The high allocation effect on labor production capacity comes from the fact that farmland tenure security can encourage farmers to participate in land rental markets, and land can transfer from farmers with low productivity to ones with high productivity via land rental markets.Based on the above research results, the policy implication is as follows:(1) transferring the core of the present farmland tenure reforms from the expansion of farmland tenure function and the extension of farmland tenure period to increase actually farmland tenure security; (2) perfecting the policies and laws relative to farmland tenure, for instance, narrowing the scope of land readjustments in the rural land contracting law, strictly restricting land readjustments as a result of the change in population or land requisition; (3) enhancing the farmland tenure reforms at the village-level or township-level, and taking effective measures to make farmers believe in farmland tenure security, for example, propagandizing farmland tenure policies by media and issuing farmland tenure certificates; (4) accelerating the construction of the rural social security system, releasing the social insurance function of farmland tenure; (5) improving the surrounding environment, for example, augmenting the local governments'investments in the field of agricultural production infrastructures, and reducing the risk of long-term investments from natural environment; enhancing agricultural product price control, and reducing the risk of long-term investments from output markets; creating off-farm employment opportunity and accelerating land rental market development.