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Institutional Regime, Off-Farm Employment, and the Interaction Effect: What are the Determinants of Households’ Forestland Transfer in China?

Han Zhang (), Jari Kuuluvainen (), Youliang Ning (), Wenmei Liao () and Can Liu ()
Additional contact information
Han Zhang: College of Economics and Management, Northwest A&F University, No. 3 Taicheng Road, Yangling 712100, China
Jari Kuuluvainen: Department of Forest Sciences, University of Helsinki, P.O. Box 27, 00014 Helsinki, Finland
Youliang Ning: Research Institute of Forestry Policy and Information, Chinese Academy of Forestry, No. 1, Dongxiaofu, Xiangshan Road, Beijing 100091, China
Wenmei Liao: College of Economics and Management, Jiangxi Agricultural University, Nanchang 330045, China
Can Liu: College of Economics and Management, Northwest A&F University, No. 3 Taicheng Road, Yangling 712100, China

Sustainability, 2017, vol. 9, issue 10, 1-15

Abstract: The development of the land rental market has been widely attributed to the associated institutional regime and the functioning of the off-farm labor market. However, little is known of the interaction effect of these two factors. To fill this gap, we employ a nationwide representative household dataset to investigate the effects of China’s collective forest tenure reform (CFTR) and off-farm employment on forestland transfer in China. Special interest is focused on their potential interaction effect. The Smith-Blundell instrumental variable tobit model is adopted to account for the endogeneity of off-farm employment. The estimation results show that both the tenure reform and off-farm employment significantly influence forestland transactions. However, compared to the positive effect of the reform on both renting in and renting out forestland, the effect of off-farm employment is mixed, that is, its effect is negative when forestland is rented in but positive on rent-out decisions. An important finding is that the CFTR imposes a negative enhancement effect on forestland rent-in through its interaction term with off-farm employment. In contrast, the enhancement effect on rent-out is not statistically significant, which may be due to the neutralization by the endowment effect of the CFTR.

Keywords: collective forest tenure reform; China’s forestland transfer; off-farm employment; interaction effect; endogeneity; instrumental variable tobit (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2017
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