Farmland Transfer, Scale Management and Economies of Scale Assessment: Evidence from the Main Grain-Producing Shandong Province in China

Abstract

Promoting farmland transfer through the farmland rental market is an essential instrument to achieve the centralized scale operation of farmland in China. However, few studies have explored or verified the economies of scale after land concentration. This study uses face-to-face interviews to randomly select 395 farmers engaged in land scale management in 68 villages of 11 cities in Shandong Province. Based on these data, a production cost function model is used to measure the cost elasticity of farmland scale management and further empirically test whether farmland scale management can achieve economies of scale in actual agricultural production. The empirical results show that the development of farmland scale operation can reduce production costs and realize the economy of scale. In other words, the scale of farmland management still has the possibility of further expansion. More importantly, we find the operation cost of farmland is significantly influenced by the price of farmland transfer, fixed capital input and labor input, especially the scale operator with rich planting experience and good cultural quality is an important human capital stock, which can make significant contribution to reducing production cost and developing the positive effect of scale operation. To promote farmland scale management in China, we should pay attention to reducing the transferring cost and transaction cost of farmland by building the land transfer market trading platform, increasing the subsidies for farmland transfer and developing agricultural mechanization, which is helpful to improve agricultural productivity and realize the scale economy. This research can provide a reference for rational land scale management and land use policymaking.