Intended and unintended environmental consequences of grassland rental in pastoral China.

Among herders, market-oriented grassland rental has been prevalent in China following the implementation of the Household Contracted Responsibility System, which allocated formerly collectively-owned use rights to individual herders. However, empirical evidence on the effect of grassland rental on herder households' overgrazing behaviour is scant, despite the fact that it is one of the main determinants of the severe grassland degradation in China. This study thus investigates the effects of grassland rental on both household- and plot-level grazing intensity and overgrazing based on a survey of 876 plots and 516 households in the Inner Mongolia, Qinghai, and Gansu provinces in China. An instrumental variable approach is utilised to correct the endogeneity bias of herders' decision to rent in grassland. The household-level empirical results show that each 1000-mu increment of rent-in grassland leads to an intended 42% decrease in the overall grazing intensity and a 61% decrease in the overgrazing index. However, a plot-level analysis pooling both rent-in and self-owned grassland plots reveals the unintended consequence that herders are over-exploiting rent-in grassland plots; as a result, the grazing intensity on rent-in grassland is 2.03 times that on owned grassland. Therefore, grassland rental should be encouraged, but the monitoring system should pay more attention to the overgrazing of rental grassland.