The effect, mechanism, and heterogeneity of grassland rental on herders' livestock production technical efficiency: evidence from pastoral areas in Northern China

The conflict between grassland degradation and livestock production is a global problem. Raising technical efficiency (TE) is simultaneously conducive to livestock production and grassland restoration. However, production factors allocation imbalance caused by the grassland shortage in countries that implemented private grassland property rights has inhibited the improvement of TE. As herders' primary way to reallocate grassland spontaneously, grassland rental becomes prevalent, but its conduciveness in improving herders' TE and its mechanism has not been strictly confirmed. Using survey data of herders in Northern China as an example, this study empirically analyzed grassland renting-in's impact on TE after considering the endogeneity. Results show that grassland renting-in is conducive to improving TE, and its effect comes from the resource balance effect rather than the ability effect. Renting-in grassland and each 100-mu increment of rent-in grassland leads to a TE increase of 2.34% and 0.056%. Meanwhile, its effect on TE is heterogeneous; herders with lower TE can achieve greater TE improvements. Thus, the current grassland rental market promotes the inclusive growth of livestock production because small- and medium-sized herders are the main components of herders and the main participants in the grassland rental market; meanwhile, grassland renting-in narrows down the efficiency gap between low-efficiency and high-efficiency herders. Our results emphasize the importance of optimizing resource allocation through the grassland rental market to improve the TE in grassland privatization countries. Therefore, grassland rental should be encouraged without exploiting new grassland resources, and policymakers should concentrate more on reducing the grassland rental market's friction rather than overemphasizing transferring grassland to capable individuals.