In the process of China's urbanization, non-farm employment and farmland rental activity are closely correlated. Using data from a survey on rural households in three Chinese provinces, this article examines the relationship between farmland renting activity and non-farm employment with simultaneous equations that consider the farming ability of farmers. Our results are fourfold. First, farmland renting-out promotes non-farm employment, while farmland renting-in reduces non-farm employment. Second, non-farm employment encourages farmland renting-out and decreases farmland renting-in. Third, farming ability increases farmland renting-in but decreases non-farm employment. Fourth, non-farm employment decreases the farming ability of farmers. Based on our empirical findings, we would suggest that the Chinese government further reforms its land system in rural areas, which could better facilitate land-use-right transfer and promote farmland rental market.
Keywords: farming ability; farmland renting-in; farmland renting-out; non-farm employment.