Impacts of agricultural incentive policies on land rental prices: New evidence from China

Agricultural incentive policies affects not only agricultural production, but also land rental price. This paper extends the theoretical framework of the effect of agricultural incentive policies on land rental prices by simultaneously considering agricultural tax, agricultural subsidy and output price support policies and methods to implement these policies. The empirical analyses are based on a unique dataset from several rounds of representative rural household surveys that recorded the land rental prices of 7122 plots in 276 villages across 11 provinces during 1999–2018 in China. The survey results show that land rental price had increased significantly until the middle 2010s and then started to fall thereafter. Eliminating agricultural tax based on cultivated land and implementing price support policy through government procurement program have significantly raised land rental price, but the effect of agricultural subsidy to contract holder/owner on land rental price is insignificant. While the econometric results are consistent with the theoretical expectations, this study provides strong empirical evidence that the recipient of subsidy (owner or operator/tenant) matters, and finds the impacts of agricultural subsidy and output price support policies on land rental price in China differ significantly from the previous findings in developed countries due to different ways to implement subsidy and price support policies. The paper concludes with policy implications.