Response Mechanism of Farmers’ Livelihood Capital to the Compensation for Rural Homestead Withdrawal—Empirical Evidence from Xuzhou City, China

The Chinese government has implemented a homestead withdrawal policy to improve the efficiency of rural construction land use. The compensation for rural homestead withdrawal (CRHW) is crucial to the reconstruction and sustainable development of farmers’ livelihoods. This paper analyzed the response mechanisms of farmers’ livelihoods to the CRHW with the combined application of the logistic regression, the mediation effect model, and the moderating effect model. The results indicated that CRHW had a significant positive impact on the sustainable livelihoods of rural households, mainly by improving the physical capital and social capital. In addition, adaptability and livelihood diversity played intermediary and regulatory roles in the positive impacts of the CRHW on sustainable livelihoods, respectively. The conclusions may provide insight into the demand for more reasonable compensation policies to ensure the sustainability of farmers’ livelihoods.