Farmland rental participation, livelihood capital, and rural income inequality: evidence from rural China

Using data from the China Family Panel Studies through a national rural survey, we analysed the effects of farmland rental participation and five types of livelihood capital on rural household income. We considered different livelihood strategies and applied the sustainable livelihood framework. Additionally, we used a regression-based Shapley-value decomposition method to examine how farmland rental participation and livelihood capital contribute to the rural income gap. Additionally, we investigated whether farmland rental participation is beneficial in reducing rural income inequality. The results show that farmland rental participation can lead to income benefits for the vast majority of farmers. Furthermore, farmland rental participation is not a primary factor contributing to the rural income gap. Household physical, human, and financial capital emerge as the three factors significantly influencing the income gap. The quantile regression results indicate that providing reasonable guidance to the farmland rental market is beneficial for narrowing the rural income gap. Implementing proactive policies aimed at enhancing the human, financial, and social capital of farmers can theoretically contribute to narrowing the rural income inequality.