Purpose This study examines farm households' grain production efficiency under land transfer conditions and its impact on macro-level food security goals. Design/methodology/approach Household-level data from the Rural Fixed Observation Points (1986–2015) were analyzed using three regression models that included data on land transfers (both in and out). The findings were validated using endogeneity tests and robustness checks. Findings Land transfer boosts total grain production and yield per unit area but reduces farmers' earnings. A “capital substituting for land” model of food production security is identified, where increased investment raises grain output without improving farmers' income. These findings show a fragile coherence between land transfers and macro-level food security goals. Given that a significant increase in the cultivated land area is unlikely in the future and that household contract farming may dominate rural land management, China's food security strategy should be built on incentive-compatible policy foundations to preserve grain-producing farmers' enthusiasm. Research limitations/implications This study fails to fully account for the heterogeneous effects of regional differences on land transfer outcomes, and lacks intermediary variables or mechanism tests to examine the specific process of “capital substituting for land”. Practical implications This study highlights the conflict between farmers' dual objectives of maximizing grain output and profit under cultivated land use regulations. Accordingly, national food security safeguards should be based on incentive-compatible policy foundations to effectively sustain grain farmers' enthusiasm. Social implications The macro-level food production security can be attained without relying on external financing. Originality/value This study reveals a “capital substitution for land” model for increasing individual farmers' micro-level grain production and the conflict between farmers' dual objectives of maximizing grain output and profit under cultivated land use regulations.
Liu et al. (Mon,) studied this question.