Formal and Informal Institutions in Farmers’ Withdrawal from Rural Homesteads in China: Heterogeneity Analysis Based on the Village Location

Abstract

Withdrawal from rural homesteads (WRH) in China is mainly conducted under the guidance of government and follows the principle of farmers’ voluntary participation, in which both formal and informal institutions play essential roles. However, few studies have systematically analyzed the institutional factors in WRH. By introducing both formal and informal institutions into the analysis framework, the aim of this study was to explore the impacts of formal and informal institutions on farmers’ behavior to WRH, and the interaction between formal and informal institution in different villages. Based on survey data from farmers in Jinzhai, China, this study adopted a binary probit model and factor analysis. (1) The study revealed that farmers’ cognition of homesteads property rights and their trust in village cadres are the key formal institutional factors affecting farmers’ behavior to WRH, and farmers’ social networks, reciprocal norms, and trust in villagers are the key informal institutional factors affecting farmers’ WRH; (2) Both formal and informal institutions promote farmers’ WRH, and informal institutions play a more important role. However, there is no interaction between formal and informal institutions in the whole sample. (3) Furthermore, the effect of formal and informal institutions on farmers’ WRH have the heterogeneity of village location: there is a complementary relationship between formal and informal institutions in farmers’ WRH for villages with a medium proximity to the county seat, and a substitution relationship for villages far away from the county seat. Finally, this study discusses the implications of these findings on the new round of WRH policy.