Aging population, farm succession, and farmland usage: Evidence from rural China

Abstract

The aging farming population has a significant influence on production agriculture, succession planning, successors, and farmland usage. Given recent trends in urban migration and increased opportunities for off-farm work, aging farmers increasingly face problems with farmland succession and usage in China. This study investigates the usage of farmland in the absence of a farm successor. Using multinomial logit regression model and data from rural households, we find that aging farmers without successors tend to have options for farmland usage. Specifically, the presence of a grain subsidy increases the likelihood of keeping the farmland in agriculture—albeit by hiring labor or leasing out farmland and decreases the likelihood of pooling farmland into farming cooperatives as shareholders. Off-farm work decreases the likelihood of using hired labor and leasing out farmland. Rich rural households are less likely to keep farmland idle. Large farm operators are more likely to lease out farmland. Finally, rural people with pension plans are more likely to pool their land in land cooperatives — a less-risky option.

Introduction

The issue of an aging society has become a highly prevalent social problem not only in developed countries (Fichtner, 2018) but in developing countries (Masters, 2013). The most significant impact of an aging population, however, occurs in production agriculture. Production agriculture is back-breaking work that relies on labor, and farm operators tend to be older than average worker in the overall workforce. Older workers, on average, tend to be less productive than younger workers. Moreover, due to small land holdings, large family sizes, and higher off-farm wages, young and middle-aged individuals prefer to participate in off-farm labor activities (Rizwan et al., 2017). Older farm operators want to retire from farming, and retirement and succession decisions in family farms are interrelated (Kimhi and Lopez, 1999). As a result, older farm operators face a farm succession problem. In many cases, older farm operators end up with no successors and then have to decide on the future of their farmland—whether to rent it out, hire labor, or participate in a profit-sharing venture by pooling their farmland with others.¹

The prosperity and sustainability of agriculture depends on an effective succession of farmland, according to several studies in the literature (Bertoni and Cavicchioli, 2016; Joosse and Grubbström, 2017; Mishra et al., 2010). However, the children of older farmers the new generation of potential farmers are more likely to participate in the off-farm labor market because off-farm income is higher and stable and offers a strategy for exiting agriculture (Corsi and Salvioni, 2017). In addition, the lack of a successor may lead to declines in productivity, financial performance, and innovation in farming (Harris et al., 2012; Sottomayor et al., 2011). Therefore, current old-age operators without successors face the dilemma of farmland usage.

China, a developing country with the world’s largest population, has about 35% of its labor force in agriculture, compared to 2.5% in the United States. According to the third National Agricultural Census, China had about 314 million agricultural operators in 2016. The age distribution of the agricultural operators is interesting. For example, the population under age 35 was about 60 million and accounted for just 19% of the total agricultural operators; the population ages 36–54 was about 149 million and accounted for about 47% of total agricultural operators; and the population age 55 and above was about 106 million and accounted for 34% of total agricultural operators (NBS, 2016). Like the U.S., China suffers from an aging farming population. Since 93% of China’s total agricultural operators are involved in crop production, farmland succession is a serious social problem. Note that in China the state technically owns and controls farmland, but farm families are allocated land that they operate and pass on to the next generation.² However, farm families can lease their farmland to others but cannot sell it. Land reforms under the Deng Xiaoping era have allowed individuals to lease land from villages.

Readers also should note two salient features of the Chinese farmland structure and ownership. First, under the China’s Household Contract Responsibility System and households have only three rights: to transfer the rights of operation of the farmland, only rural households, as members of the collective village, have the original contractual and operational rights (Wang and Zhang, 2017). Although farmland leasing is emerging in China, farming households can only transfer the rights of operation of farmland, return the contractual rights of the farmland to the collective village, or pass the farmland to their family members. Second, China’s dual-track structure of socio-economic development requires households in mainland China to register as either a Rural Hukou or an Urban Hukou. This law also restricts household migration (and by extension, labor migration) between Hukous. Migration from rural areas to urban areas is possible. Because of Hukou law requirement, however, the opposite is not realistic because only members of a Rural Hukou can receive rights to operate farmland in a village.³ Considering these two features and the rising share of aging farmers, farm operators are concerned about their farmland usage decisions. The issue is paramount in cases where farm operators lack successors.

Therefore, this study’s objective is to investigate the factors affecting farmland usage decisions in the absence of successors in China. We use farm-level data from nine Chinese provinces (see Fig. 1) and multinomial logit modeling technique to study this objective. The survey was conducted in 2015. This study’s contributions are unique in several ways. First, the study addresses a timely issue faced by a country with the largest number of farmers, with smallholdings, and with a large share of farm operators ready to retire. Second, the issue of farmland usage in the absence of a successor is interesting in a country where a farmland market⁴ does not exit and where economic and political systems (defined Hukous per household) discourage the movement of urban people to rural areas. Finally, this is the first study, to best of our knowledge, to investigate farmland usage by farm operators in the absence of successors.

The rest of this paper is organized as follows. The next section discusses the background of farmland, property rights of farmland, and farmland usage in China. Section 3 presents the survey data and descriptive statistics. The empirical framework and estimation procedure are developed in Section 4. Section 5 analyzes and discusses the empirical findings. The last section concludes the study and provides policy implications.