Will Transaction Cost Be Reduced in the E-Commerce Model of Farmland Transfer in China?

Abstract

Farmland transfer is an inevitable approach to solving farmland fragmentation and the resulting low productivity in China. Although the central government has formulated various guidelines on farmland transfer, the traditional transfer model faces high transaction cost and thus hinders transfer. With e-commerce development in China, an alternative Jutudi model of farmland transfer with e-commerce has occurred in China. Although transaction cost is an important perspective for understanding reforms, few studies have been conducted to explore whether the transaction cost of the Jutudi model would be reduced compared with the traditional model of farmland transfer and why the Jutudi model succeeds. This study introduces the operation mechanism of the Jutudi model of farmland transfer and the context of the pilot project in Jixi County, Anhui Province. Changes in transaction cost in terms of information search cost, negotiation and contracting process costs, and contract supervision and execution costs are analyzed in the Jutudi model. It is found that the productivity of transferred farmlands significantly improved using the Jutudi model in Jixi County. Transaction cost is generally lowered in the Jutudi model compared with the traditional one. How the changes in transaction cost contribute to farmland transfer is also explained. Potential problems and relevant recommendations have also been discussed to promote the Jutudi model.