Understanding grassland rental markets and their determinants in eastern inner Mongolia, PR China

- Around 43% sampled herder households are involved in grassland rental markets.
- Imbalance in “people-grassland-livestock-productive assets” are the major determinants of market participation.
- Livestock herd size encourages rent in while productive assets discourage rent out behaviors.
- Educated (10 years) herders with higher Chinese level and more family labor available tend to expand their grazing.
- Need to ensure adequate measures to implement grassland policies.

Grassland rental markets function as a venue for balancing production factors of herder households. This paper jointly determines the socioeconomic factors affecting herders' grassland rent-in and rent-out behaviors by applying Bivariate Probit Model with clustering standard errors on 422 households' data from Eastern Inner Mongolia. Results reveal that imbalances in “people-grassland (grass)-livestock-productive assets” are the major determinants of the herder households' participation in grassland rental markets. Given other factors, an increase of 10 thousand yuan in a household' productive assets renders an increase/decrease in their rent-in/rent-out participation likelihood by 1.0% and 2.0%, respectively; an increase of 100 standard sheep unit may bring about 4% increase in rent-in participation and 0.6% decrease in rent-out participation; an increase of 100 hm2 in hayfields may decrease and increase the likelihood of rent-in and rent-out participation by 13% and 3%, respectively; an increase of 1.0% in ratio of non-livestock income may decrease propensity of rent-in by 0.34%, and increase propensity of rent-out by 0.2%. In addition, the education and Chinese level of household head, and the available family labor encourage participation in grassland rent-in market. Main findings help facilitate better allocation of herders' livelihood assets by participating the functional grassland rental markets.