China & World Economy / 29–50, Vol. 28, No. 3, 2020

Does Land Rent between Acquaintances Deviate
from the Reference Point? Evidence from Rural China

Tongwei Qiu, Biliang Luo, Qinying He

Abstract

This paper theoretically and empirically investigates whether acquaintance networks influence the deviation of land rent from the reference point advanced by Hart and Moore. The coefficient of variance and the range of land rent are used to represent the degree of deviation from the reference point. Based on village-level data from the 2015 China Household Finance Survey, the estimated results indicate that land rent between acquaintances is more likely to significantly deviate from the reference point. Although rental transactions are conducted between acquaintances, larger deviations from the reference are also associated with a longer time to close deals. Our analysis using household-level data further supports our findings, indicating that land rental markets embedded in the acquaintance networks of rural China are in a transition period and have characteristics of both relational and market orientation. The policy makers should introduce more outer village lessees or other market ingredients to increase the voluntary marketization of land rentals inside acquaintance networks.