The impact of land rental prices on agricultural technical efficiency: evidence from family farms in China

Rong Cai, Jie Ma and Shujuan Wang

China Agricultural Economic Review, 2025, vol. 18, issue 1, 144-160

Abstract: PurposeFamily farms in China, characterized by their large-scale, intensity and commercialization, are increasingly recognized by the government as key drivers of high-quality agricultural development. However, the continued rise in land rental prices is increasing the cost of agricultural production, challenging the sustainable operation of family farms and attracting widespread attention from both government and society. Therefore, it is crucial to investigate how land rental prices influence the technical efficiency (TE) of family farms and to explore the mechanisms underlying this effect.Design/methodology/approachThis study assumes that producers aim to maximize return on outlay and employs an endogenous stochastic frontier model to investigate the impact of land rental prices on the TE of family farms, using a cross-sectional dataset from 485 family farms in East China.FindingsThe average TE score in the sample area is 0.72, indicating considerable room for improvement. Higher land rental prices are found to have a significant negative impact on TE, a result further validated by robustness checks. Land rental prices influence farmers’ TE primarily by reducing participation in technical training, decreasing investment in agricultural machinery and hindering the adoption of innovative crop varieties.Originality/valueThis is the first study to examine the impact of land rental prices on the TE of family farms in China. By assuming that producers maximize return on outlay rather than output, the study addresses the endogeneity of input variables in the production frontier, thereby reducing bias in the estimation of TE. Additionally, to account for the endogeneity of land rental prices, an endogenous stochastic frontier model is employed. The findings provide valuable insights into how land rental prices influence farmers’ TE and offer practical recommendations for the development of land rental markets in other countries.

Keywords: Family farm; Technical efficiency; Endogenous stochastic Frontier model; Land rental prices; China (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:caerpp:caer-08-2024-0252

DOI: 10.1108/CAER-08-2024-0252

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