Scale Effects, Technical Efficiency and Land Lease in China

Using a panel dataset from Zhejiang province in China over the period 1995-2002, wepropose a two-step estimation procedure to investigate the links between land lease activityand production efficiency. We find that the output elasticity with respect to land, the scaleeffect and the technical efficiency are higher for farmers involved in land-lease activities. Inaddition, technical efficiency and land-lease activity are endogenous, and farmers with highertechnical efficiency are more likely to lease more land and adopt advanced technologies toachieve higher profits, which in turn alters the technical efficiency.