Land rental development via institutional innovation in rural Jiangsu, China

•RSCs have been established recently at the local level in rural China.•RSCs serve as intermediate agents for facilitating land exchange.•We estimate the effectiveness of Rural Shareholding Cooperatives (RSCs) in encouraging land rental.•The establishment of RSCs paves the way for the extension of property rights to farmland.

Previous studies have demonstrated that there are two important preconditions for encouraging land rental in agriculture: out-migration and the enhancement of security and transferability of land rights. Focusing on the latter, we scrutinize the impacts of institutions aimed at facilitating land use dynamism, particularly the Rural Shareholding Cooperatives (RSCs), which have been established recently at the local level in rural China. In general, we find that RSCs can pave the way for the extension of property rights to farmland and promote more efficient land use patterns. Using survey data collected from 300 village committees in rural Jiangsu province, we estimate the effectiveness of RSCs in encouraging land rental. Our analysis reveals that RSCs can serve as intermediate agents for reducing transaction costs associated with exchange of land use rights and, thereby, not only encourage land rental/consolidation activities but also enable the entry of non-farm household entities into the farm business.