Land fragmentation and off-farm labor supply in China

This thesis focuses on testing whether land fragmentation in China has an impact on off-farm labor supply by utilizing a data set developed between 1995-2002 for the Zhejiang, Hubei and Yunnan Provinces of China. Adopting the institutional innovation theory and a microeconomic farm household model, the thesis contributes to improving the understanding of the current widespread phenomenon of land fragmentation in four aspects: the determinants of land fragmentation in China; a theoretical analysis of the effects of land fragmentation; estimating the effect of land fragmentation on agricultural labor productivity; and estimating the effect of land fragmentation on off-farm labor supply. First, an institutional innovation theory is introduced to analyze the determinants of land fragmentation in China. We find that the current land institution, which leads to land fragmentation, has its roots in the demand for land decentralization from farmers, but is constrained by incomplete property rights. Therefore, land reallocation does not necessarily increase land fragmentation, and whether the land market can reduce land fragmentation or not depends on the development of the local labor market. Second, the microeconomic farm household model is applied to aid in understanding the effects of land fragmentation on agricultural labor productivity and offfarm labor supply. The analysis shows that the effects of land fragmentation depend on the local shape of the production function. A positive effect of land fragmentation on agricultural labor productivity may increase the off-farm labor supply, while a negative effect suggests a decrease of off-farm labor supply, and the effect of off-farm labor supply may be neutral if the labor market is constrained. Third, a test for the effect of land fragmentation on agricultural labor productivity is conducted, and the result shows that the land fragmentation decreases agricultural labor productivity in general, implying an adoption of land consolidation. But this effect is only obvious in the Zhejiang province, where the labor market is better developed. Finally, a direct test for the effect of land fragmentation on off-farm labor supply is implemented. The findings indicate that the off-farm labor supply is not influenced by land fragmentation due to the constrained labor market, suggesting a need to further develop the labor market. Furthermore, the off-farm wage and educational levels play a role in increasing off-farm labor supply, while the land endowment intends to decrease it