Mitigating Farmland Fragmentation through Land Rental Markets: Evidence from Rural Households in Northeast and Central Thailand

Land fragmentation poses a persistent challenge to rural agricultural sectors, particularly in Thailand, where it hinders productivity and efficient land use. This study explores the role of the land rental market in addressing this issue, using panel data from households in Northeast and Central Thailand. Trends from 2000 to 2017 show a steady decline in the size of land rented per household, while the land fragmentation index exhibits greater variability. Instrumental variable regression results indicate that increased land rental significantly reduces fragmentation, resulting in larger and more efficient farming plots. Larger households tend to rent less land, while older and more educated household heads are associated with lower fragmentation, highlighting the importance of experience and education in land management. Households with higher nonfarm income prioritize land consolidation, further reducing fragmentation, whereas those affected by shocks such as natural disasters experience increased fragmentation as a risk mitigation strategy. Rice farmers, in particular, operate on more fragmented land compared to upland crop farmers. However, an increase in farm activities leads to higher fragmentation, underscoring the need for policies that balance land consolidation with support for farm diversity. Government policy should focus on promoting land rentals by reducing transaction costs, such as revising the adverse possession law, which currently discourages landowners from leasing out their land.