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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 ()
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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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