Does labor off-farm employment inevitably lead to land rent out? Evidence from China

The focus of land economics is on how to decrease the misallocation of resources to achieve an optimal allocation of resources. Both the theories of new economics of labor migration (NELM) and the conclusions of empirical studies reveal that land resources will inevitably be reallocated (e.g., rented out) if the resources of family labor are reallocated (e.g., off-farm employment). However, this study reveals that off-farm employment does not inevitably lead to land rent out. More precisely, this study uses survey data on 8031 peasant households from 27 provinces in China and explores the relationship between off-farm employment and land rent out by describing spatial features and through empirical analysis (e.g., IV-Probit model and IV-Tobit model). The results show the following: 1) There is an indirect relationship between off-farm employment and land rent out regarding spatial area aggregation, i.e., regions with a higher ratio of off-farm employment also have a lower area of land rent out. 2) Off-farm employment is significantly positively correlated with the behavior of land rent out, but its square is significantly negatively correlated with the behavior, i.e., there is an inverted U-shaped relationship between off-farm employment and the behavior of land rent out, with the turning point being 55.55% off-farm employment. 3) Off-farm employment is significantly positively correlated with the area of land rent out, but its square is significantly negatively correlated with the area, i.e., there is an inverted U-shaped relationship between off-farm employment and the area of land rent out, with the turning point being 56.22% off-farm employment. This study helps explain why China has a high ratio of off-farm employment but a lower rate of land rent out.