The Distribution of Residual Controls and Risk Sharing: A Case Study of Farmland Transfer in China

• Main Authors: Hongyun Han, Hanning Li
• Format: Article
• Language: English
• Published: MDPI AG 2018-06-01
• Series: Sustainability
• Subjects: farmland transfer; contract framework; risk sharing; China
• Online Access: http://www.mdpi.com/2071-1050/10/6/2041

Structuring contracts to share interest and risk is the central premise of farmland transfer, yet the contract framework and its determinants have rarely been empirically tested based on micro-level data. In this study, we aim to examine factors underlying the balanced distribution of residual controls and risk sharing on contract framework by using field surveyed data of 353 individual farmland transfer contracts. Our evidence shows that the policy of farmland property rights registration has a significant effect on the contract framework and supports the implication of enforcement costs exerted by the effects of the scale ratio and the contract form, contract duration, conversion way, and long-lived assets input. Although our findings fail to support the typical implication of risk sharing as an explanation of contract framework of farmland transfer, given the symmetric positions of two contracted parties of rural farmer households, it is proved that right confirmation and contract duration are two important factors underlying contract options.