PurposeDeveloping nations need good cultivated land rental markets to foster rational resource use and to enhance productivity and equity. Can cultivated land rental markets emerge in the face of rapidly developing off‐farm labor markets? The purpose of this paper is to measure the correlation between the emergence of off‐farm employment and cultivated land rental in China.Design/methodology/approachBased on a panel data from 2000 and 2008, the authors constructed econometric models to identify the impact of off‐farm employment on the decisions of households to rent out and rent in cultivated land.FindingsThis paper finds that the emergence of off‐farm employment has significant and positive impacts on stimulating household to rent out cultivated land. The effect is less prominent for renting‐in decisions.Originality/valueThe paper empirically estimates the impacts of off‐farm employment on cultivated land rent markets based on a unique panel data set from a national representative sample.

The purpose of this paper is to empirically track the progress and consequences of the emergence of cultivated land markets in China since 2000. We draw on a set of nationwide, household-level panel data (for 2000 and 2008) and find that the markets for cultivated land rental have emerged robustly. According to our data, 19 of China's cultivated land was rented in farm operators in 2008. We also find that the nature of China's cultivated land rental contracts has become more formal and lengthened the period of time that the tenant is able to cultivate the rented-in plots. While there may be benefits for lessors and tenants, our data show that there are falling rates of investment in organic manure. The farmers in our sample have reduced organic manure use from 13 tons/ha in 2000 to 5 tons/ha in 2008. Part of this fall is due to the rise of cultivated land rental markets. The analysis, however, does not find that improved property rights in cultivated land rental affect investment largely because property rights have largely been established by 2000, the first year of our sample. Our results, however, also show that there are forces that appear to be mitigating the negative consequences of rising cultivated land rental. After holding constant initial rental rates and other factors, we find that the gap between investment in organic manure in own land and rented-in land is narrowing. One interpretation of our findings is that if policymakers can find ways to even further strengthen the rights of lessors and tenants as well as lengthen contract periods, farmers-even those that rent-will invest more in their land, because they will be able to capture the returns to their investments. JEL classification: Q15, Q18, P14