Pension Effects on Land Transfer and Intra-Household Labor Allocation of Farmer Households: Evidence from China

This article uses two waves of panel data from China Land Economic Survey (CLES) in Jiangsu Province and employs a fixed-effects two-stage least squares (FE-2SLS) approach to identify pension effects on farmers’ labor allocation and land transfer decisions. In the FE-2SLS models, pension is instrumented by the average pension of other households in the same village. The results show that pension promotes land transfer-out, reduces household farm labor input, and increases household off-farm labor input. We further identify intra-household heterogeneity behind the pension effects. Specifically, pensioners in a household tend to leave farming activities without transitioning to off-farm employment, while non-pensioners shift the labor from farm to off-farm employment. We also examine heterogeneity by household budget pressure using two grouping strategies based on shortage experience and a composite budget-constraint indicator. The results show that the pension effects are more clearly observed among households without budget shortage. The estimates for households with budget shortage are less precise. These findings suggest that pension effects are complex in driving farmers’ resource allocation in their households. However, Jiangsu Province provides a substantial number of off-farm employment opportunities and features a well-developed land transfer market. The estimated pension effect in this area may not be applicable to less developed regions.