How land fragmentation affects off-farm labor supply in China: Evidence from household panel data

This study provides a deeper theoretical understanding of the linkages between land fragmentation and off-farm labor supply and investigates this relationship empirically in a more direct and robust way than in the existing literature. Drawing upon a rural household panel dataset collected in Zhejiang, Hubei and Yunnan provinces from 1995-2002, we estimate the effects in two steps. First, we estimate the effect of land fragmentation on labor productivity. Second, we estimate the effect of land fragmentation on off-farm labor supply. The production function results show that land fragmentation indeed leads to lower agricultural labor productivity, implying land consolidation will make on-farm work more attractive and thus decrease off-farm labor supply. However, the effect of land consolidation on off-farm labor supply cannot be observed in the presence of imperfect labor market and this conclusion is supported by a direct estimation of the effect of land fragmentation on off-farm labor supply