Land Reallocation Reform in Rural China: A Behavioral Economics Perspective

30 Pages Posted: 4 Feb 2014

See all articles by Lei Feng

Lei Feng

Renmin University of China

Helen X. H. Bao

University of Cambridge - Department of Land Economy

Yan Jiang

School of Statistics, Renmin University of China

Date Written: February 3, 2014

Abstract

Based on prospect theory, we develop a theoretical framework to unify divided views on land reallocation reform in China. Our theoretical framework and empirical verification explain the driving forces behind the success of the rural land reallocation reform in China. We find that rural land reallocation reform in China is characterized by induced and imposed institutional changes. The relationship between induced and imposed institutional change is complementary instead of competing. The decision and frequency of land reallocation are affected by both local endowment and central government policy. Empirical findings also suggest that land reallocation reform in China is progressive, with interim policy targets from different stages taking gradual effect. The progressive implementation of the “No Reallocation” policy is the reason behind the widespread, diversified land reallocation practices across the country; this policy also contributes to the success of rural land reform in China. The findings also provide valuable lessons for government-led land right formalization in other developing countries.

Keywords: Land reallocations, Institutional change, Induced and imposed change, Prospect theory, Land market in China

JEL Classification: R52, R58, Q15

Suggested Citation

Feng, Lei and Bao, Helen X. H. and Jiang, Yan, Land Reallocation Reform in Rural China: A Behavioral Economics Perspective (February 3, 2014). Available at SSRN: https://ssrn.com/abstract=2389980 or http://dx.doi.org/10.2139/ssrn.2389980

Lei Feng

Renmin University of China ( email )

Room B906
Xianjin Building
Beijing, Beijing 100872
China

Helen X. H. Bao (Contact Author)

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

Yan Jiang

School of Statistics, Renmin University of China ( email )

Beijing
China

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