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Background: The distribution of farmers’ increment income is the key to the transfer of land use rights. This research aims to detect the optimal payment mode for the distribution of land increment income obtained by farmers in land rights transfer. Methods: The research relied on case analysis, mathematical analysis, and numerical simulation. Results: According to China’s existing payment modes for the increment income of rural collectively owned operating construction land (RCOCL), we summarized these payment modes into three: namely, lump-sum currency payment, a mixed payment of pension and lump-sum currency, and a mixed payment of dividend and lump-sum currency. If the land transfer price of RCOCL is lower than a specific value, the lump-sum currency payment will be optimal for farmers. Suppose the land transfer price is higher than this value. If the enterprise’s profit margin is higher than the pension rate of return, the mixed payment of dividend and lump-sum currency will be optimal; if not, the mixed payment of pension and lump-sum currency will be optimal. Conclusions: Differences in regions, enterprise attributes, and farmers’ characteristics will make the optimal proportion of pension or stock capital in land increment income (OPPSC) different. Generally, OPPSC is often between 40% and 60%.

Transfer of Land Use Rights in Rural China and Farmers’ Utility: How to Select an Optimal Payment Mode of Land Increment Income