How land fragmentation affects off-farm labor supply in China : evidence from household panel data

This paper provides a deeper theoretical understanding of the linkages between land fragmentation and off-farm labor supply in China, and investigates this relationship empirically in a more direct way than does the existing literature. Drawing upon a rural household panel dataset collected in Zhejiang, Hubei and Yunnan Provinces from 1995-2002, we estimate the effects in two steps. First, we estimate the effect of land fragmentation on labor productivity. Second, we estimate the effect of land fragmentation on off-farm labor supply. The production function results show that land fragmentation indeed leads to lower agricultural labor productivity, implying that land consolidation will make on-farm work more attractive and thus decrease off-farm labor supply. However, the effect of land consolidation on off-farm labor supply cannot be observed. One explanation for this result may be the potentially imperfect labor markets.