Life satisfaction approach to farmers' compensation for land acquisition: empirical study from the suburbs of Wuhan City

Farmers' compensation for land acquisition is not only critical to increasing their income and to playing a pivotal role in maintaining rural stability, but also to the promotion of sustainable land use. Based on analysis of Chinese land acquisition policy under the Land Management Law, which provides principles or guidelines for determining compensation according to agricultural land use in regard to farmers' previous quality of life, the Life Satisfaction Approach is introduced in this article to evaluate farmers' compensation for land acquisition. Employing data from a questionnaire survey on 346 farming households in Wuhan Suburbs, this article examined the influence of farmland on farmers' life satisfaction and evaluated the level of compensation for land acquisition. Results show that farmland has a significantly positive impact on life satisfaction, which fell by 0.033 on a five-point scale following a reduction farmland by of 1 mu. Respondents were willing to accept approximately RMB 3066.44 annual household income for the loss of 1 mu farmland; the level of compensation after discounting by 6.2% is RMB 750,000 per hectare. It was found in a further comparative study that the level of farmers' compensation for land acquisition is decidedly low, and it was also shown that their compensation standards, as well as the actual compensation, could be substantially improved by expanding economic compensation to non-economic compensation to embody farmland multifunction in terms of production and non-production against farmers' previous quality of life. This article proposes a compensation model that enriches the content of land acquisition compensation, extends the current literature on measuring compensation, and provides economic theory bases for increasing compensation standards and improving policies related to land acquisition. We consider that if this compensation model is applied, it could raise the cost of land acquisition and improve usage of land, reduce the speed of rural-urban land conversion, and improve farmers' well-being.