Competitive or crowding‐out? Estimating spillover effects from large‐scale farms on smallholders in China

Abstract Drawing on data from the Chinese Family Database for 2015, 2017, and 2019, this study employed the difference‐in‐differences method to examine the spillover effects of large‐scale farms (LSFs) on smallholders. The findings confirmed that LSFs positively affect smallholder household income and nonfarm income. The mechanisms verified that LSFs increase the nonfarm income of smallholders, primarily through the transfer out of their land. Additionally, we found that vulnerable groups—such as households with a lower proportion of the labor force, a lower proportion of members in good health, and lower total education years of the labor force—are more likely to be crowded out. Additionally, the study confirmed that LSFs steal the market from smallholders, precipitating a slightly negative competitive effect. These findings have important policy implications for developing countries implementing the LSF policy and for countries where smallholders suffer from livelihood issues.