Reputation Effect on Contract Choice and Self-Enforcement: A Case Study of Farmland Transfer in China

The prevailing informal contracts of farmland transfer in China are facing frequent disputes and defaults, which call for effective self-enforcement mechanisms operating through transactors’ reputations social networks. However, the effects reputation on contract choice have not been thoroughly considered examined by existing research case transfer. This study explores reputation’s ex-ante signaling effect farmers’ choices ex-post penalty performance contracts. Based 403 obtained from a field survey conducted Hebei province China, we apply multinomial logit model Heckman probit to perform empirical analysis. results show that, affected effect, farmers with good more likely fulfill avoid damage resulting loss future trading opportunities. stage choice, farmer’s has no significant formation chosen due trust close network demand reduced transaction costs. These findings highlight importance personal serving as form relational governance contracts, provides means enhancing contract’s effectiveness terms rural acquaintance society. It also insights into necessity creating supportive environment rules. Policies should encourage building establishment norms long-term, stable reasonable contractual relationship