Social Connection Strength and Formal Rental Stipulation in Farmland Transfer Contracts: Evidence from Rural China

Formally stipulating rental terms in farmland transfer contracts is essential to safeguarding transacting parties’ rights, anchoring market price signals, and underpinning the rule-based governance of rural land markets. Drawing on survey data from 1496 rural households across three Chinese provinces, this study empirically examines how connection strength between transacting parties shapes the decision to formally stipulate rental terms in farmland transfer contracts. Baseline estimates show that greater connection strength is significantly and negatively associated with the probability of formal rental term stipulation, a pattern robust to alternative model specifications and variable operationalizations. Mechanism analysis reveals that stronger connections inhibit formal stipulation by concurrently heightening reputational constraints among parties suppressing demand for formal enforcement mechanisms and attenuating perceived transactional risk, which erodes the perceived value of the risk-bounding function that written clauses provide. Heterogeneity analysis further shows that this inhibitory effect is concentrated among ordinary farm household transfers and disappears among new-type agricultural business entities, where institutional rationality crowds out connection-based governance logic. Beyond its direct effect on contract formalization, greater connection strength indirectly undermines the price-anchoring function of written agreements, exposing realized rents to systematic connection-based discounting. These findings carry direct implications for the demand-side redesign of contract formalization policy and the development of county-level rental price guidance systems in rural China.