Power of Agricultural Credit in Farmland Abandonment: Evidence from Rural China

Abstract

Labor, land, and funds are keys to revitalizing rural areas around the world. Previous studies have focused on the impacts of funds on agricultural production, but placed little emphasis on its role in agricultural land-use transformation. Thus, this study explores the quantitative relationship between agricultural credit and farmland abandonment from the perspective of rural revitalization. Using data on 8031 households from 27 provinces obtained from China’s Labor Force Dynamics Survey (CLDS), this study uses a Tobit model to examine the quantitative impacts of informal and formal agricultural credit on farmland abandonment. The results indicate that: (1) Access to agricultural credit helps to reduce farmland abandonment. (2) Compared with formal agricultural credit (provided by institutions), informal agricultural credit (provided by family and friends) is more significant in reducing farmland abandonment. Thus, this study enhances our understanding of the relationship between agricultural credit and farmland use. It will also prompt policymakers to improve rural financial markets in order to reduce the misallocation of farmland resources, thereby improving food security and rural economies.