Understanding Grassland Rental Markets and Their Determinants-A
Case of Typical Pastoral Areas in Inner Mongolia, P.R. China
Abstract:
Grassland is one of the indispensable productive factors of herder households, which together with
other production factors, such as labor and capital, make herders’ livestock production possible.
However, the “Household Responsible System” implemented in pastoral areas of China since the
beginning 1980s has caused severe grassland fragmentation (Liu, 2008; Li et al., 2003). On average,
each herder household has 2.2 plots (excluding summer pastures which co-managed by communities
in some areas such as Tibetan Qinghai and Sichuan), and some households have 7~8 plots; 40~77 ha
per plot with the smallest one less than 0.13 ha; average distance of plots to homesteads is 16~18 km
with the furthest one of 157~320 km; and the distance to the nearest water source is 3.2 km with the
largest one of 150 km (Tan, 2015). Differing from fragmented farmland which has a long history in
China’s agriculture (Buck, 1937; Chao, 1986) and some positive effects such as diversifying risks,
stimulating production diversification and improving food security by increasing the variety of
foodstuffs (McPherson, 1983; Bentley, 1987; Ciaian et al., 2015), although it restricts agricultural
development by creating inefficiency, hindering agricultural modernization and making it costly to
modify its adverse effects by consolidation schemes (McPherson, 1983; Simmons, 1987; Tan et al.
2008; Tan et al. 2010), fragmented grassland management is new to herder households, because
traditionally, grasslands had been communal, i.e., they were managed by communities at larger
scales (Yang, 2010); moreover, grassland fragmentation causes mismatches of production factors,
i.e.,
people
(labor)-grassland
(grass)-livestock-productive
asset
cannot
be
matched
proportionally. As a consequence, grassland management falls into the so-called fencing dilemma
(Yang, 2010; Liu, 2008).
Grassland transfer markets allow herder households to match their grassland resources with
other production factors more adequately, and are expected to become an effective venue for
improved livelihoods and ecological environment, as found in farming areas where farmland transfer
markets have been developed steadily and rapidly, from 7% in 2001 (Zhang and Wan, 2007) to 30%
currently throughout the country, in the areas with developed market infrastructure and
commercialization of agriculture, farmland transfer markets involve more than 50% farm households.
This holds also in other developing countries (Haile-Gabril, 2000; Teku and Lemi, 2004).
Theoretically and empirically, land rental markets are proved to be effective for improving efficiency,
equity and welfare at farm household level by providing a vehicle to equalize factor proportions
(Feder, 1985; Deninger, 2003; Otsuka, 2007; Holden, et al., 2009; Jin and Jayne, 2013). How
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grassland rental markets look like in typical pastoral areas of China and what are the main drivers
are not clear at present. Understanding grassland transfer markets and their determinants is thus
desirable for promoting smoothly developed grassland markets so as to enhance herder households’
welfare.
Studies on land markets are abundant worldwide (Deininger and Feder, 1998; Deininger and Jin,
2008; Holden et al., 2009; Holden and Otsuka, 2014; Teklu and Lemi, 2004; Lunduka et al., 2009;
Chamberlin and Richer-Gilbert, 2015) and across China (Qian, 2003; Zhao, 2007; Wang et al., 2007;
Li et al., 2009; Xu and Guo, 2011). Generally accepted driving factors include household’s
demographics and factor endowments which are established earlier by Deininger and Feder (1998)
and Gebeyehu (1999), and confirmed constantly by many researches later (Teklu and Lemi 2004;
Zhao, 2007; Holden et al., 2009; Holden et al. 2011; Chamberlin and Richer-Gilbert, 2015).
Moreover, availability of off-farm employment, its opportunity cost, and the degree of financial
market development are found to be important determinants of farmers’ participation in land markets
(Deininger and Feder, 1998). In addition, some other factors such as land security represented by
land certification and years of user rights influence farm households’ land rental market participation
(Holden et al. 2011; Xu and Guo, 2011).
Although land rental markets share some common characteristics and driving factors, the
specific reasons why farmers participate in the markets are varied (Teklu and Lemi, 2004).
Examining the main features and driving factors of land rental markets with consideration of
localities would be a great help for national and regional pro-poor policies. Research on grassland
transfer markets in China is urgently desirable: on the one hand, grasslands form the largest
terrestrial ecosystem and one of the most important food producers in China (Hong, 2006), cover
nearly 400 million hectares and about 42% of its total land area, and support over 40 million people
by generating livelihoods for households in pastoral areas and sustaining the culture of the minority
groups (Kemp et al., 2011); on the other hand, livelihoods of the herder households living in
grasslands dominant areas are relatively low and are becoming more and more difficult to sustain.
Given the current tenure arrangements, fostering well functional grassland transfer markets is
expected to become an effective vehicle of improving their livelihoods. Researches on grassland
transfer markets in China are therefore demanding for several reasons: firstly, differing from crop
production in farming areas which is the combination of labor (people), land and capital, livestock
production in pastoral areas is much more complicated with involvement of people, grass(land),
livestock and productive assets, among which, livestock is an important factors. Drivers of grassland
transfer markets may be different from that of farmland because of this difference; secondly, unlike
most grassland animal husbandry dominant countries such as Mongolia, Chad and Namibia, where
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customary regimes dominate under which grasslands are mainly managed communally and grassland
transfer markets at household level seem impossible (AUC-ECA-AfDB Consortium, 2012; Bruce
and Holt, 2011), China is a country having the user rights of grasslands privatized in terms of family
size as well herd size, the privatization induced grassland fragmentation together with the
misallocated initial resource endowments and human capitals create demands for transfer markets;
lastly, while there are plenty of researches on grassland transfer markets (Yu et al., 2009; Xue et al.,
2010; Zhang et al., 2010; Lai and Li, 2012; Hu et al., 2014; Yin et al., 2014), the ones applying
quantitative methods based on sufficient sample size at herder household level are limited (Xue et al.,
2010; Wang et al., 2007; Hu et al., 2014), among which, Xue et al. (2010) make a comparative
analysis on 151 farmers and 274 herders' willingness to transfer land in agricultural areas,
semi-agricultural and semi-pastoral areas; With economic model, Wang et al. (2007) examine the
driving factors of the land rental behavior of farmers and herders in semi-pastoral areas. However, it
is not clear how the data used in the analysis were collected and from where. Applying single
regression models with contracted and transferred grassland area as the only two regressors, Hu et al.
(2014) examine respectively the impacts of grassland rental markets on ecological environment by
using 100 herd households’ data collected in Siziwang Banner, Inner Mongolia in May 2012 and 109
households’ data collected in Tianzhu county, Gansu Province in August 2013.
Based on the field data collected during 2011 and 2012 from 422 herder households in 40 Sums
of 12 grazing Banners of Hulun Buir and Xilin Gol Leagues, Inner Mongolia--- typical grazing areas
in China, this paper will explore the characteristics of the grassland rental markets with some
statistical methods, and applies Logit models to examine the determinants of households’
participation in the grassland rent-in and rent-out markets. It will contribute from the following
aspects: firstly, we use own collected field survey data from typical pastoral regions of China, and the
randomly sampled herder household size is very large, given sparse area in these regions; secondly,
we apply statistical methods to examine the features of grassland rent-in and rent-out markets, and
econometric models to analyze their determinants, taking into account the generally accepted factors
and localities of our researched areas; thirdly, we calculate the marginal effects of each determinant
of the rent-in and rent-out markets. To our knowledge, this is the first study to apply such a large
sample to examine the features and driving factors of grassland rental markets in typical pastoral
regions of China. The research is expected to provide public policy implications for fostering
efficiency, equity and welfare-oriented grassland markets.
Key words: grassland tenure; grassland rental market; market participation; mismatches of
production factors; typical pastoral area of Inner Mongolia
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