Plot Size, Adjacency, and Farmland Rental Contract Choice

Abstract

The purpose of this paper is to assess the impact of plot size on the components of farmland rental contracts choice and evaluate the effects of its heterogeneities on different plot characteristics in the context of China. Based on the data from a nationally representative sample of 1215 plots among 5 provinces in rural China, this paper yields robust results using regional fixed effect method and SUR model. The results show that plot size significantly affects farmland rental contract choice. The probability of renting from non-relatives, signing a written contract, and renting with a fixed term increases by 0.5%, 0.9%, and 0.6% with 1 mu increase of plot size, respectively, and the annual rent rises by RMB 3.514 per mu. The effects of plot size on contract form, contract rent, and contract term were much larger for adjacent plots, especially for the flat and eastern plots. The findings imply that the government should encourage the innovation of managing or using plots that are of small size or non-adjacent to promote the integration of farmland resources for the formalization of farmland rental contracts, especially for mountain and western areas.