How Farm Machinery Rental Services and Off-Farm Work Affect Household Income in China

(1) Background: Most nations struggle to close significant income gaps between high and low earners. While the adoption of farm machinery rental services and off-farm employment may be beneficial, it is unclear whether jointly applying both approaches can raise income levels in rural households or help narrow the income gap within the farm sector. This study investigated scenarios involving both participation in farm machinery rental markets and in off-farm work, analyzing their varied impacts on household incomes based on survey data from 1027 rice producers in rural China. (2) Methods: We employed a two-stage econometric procedure encompassing a bivariate ordered probit model with an endogeneity-corrected unconditional quantile regression model. (3) Results: Rice farmers often simultaneously rent farm machinery services and engage in off-farm work. Both activities positively affect their household incomes; however, these effects vary across different income levels. Renting farm machinery provides greater marginal benefits for lower-income households, while off-farm employment has a stronger impact on higher-income households. Farm machinery rental services appear to benefit disadvantaged households more than off-farm employment opportunities do. (4) Suggestions: To enhance the welfare of lower-income households, policymakers should focus on expanding access to farm machinery rental services.