Market Versus Administrative Reallocation of Agricultural Land in a Period of Rapid Industrialization

36 Pages Posted: 20 Apr 2016

See all articles by Yang Yao

Yang Yao

Peking University - China Center for Economic Research (CCER)

Michael R. Carter

University of Wisconsin - Madison - Department of Agricultural & Applied Economics

Date Written: November 1999

Abstract

Property rights in China are moving in two different directions. In some villages, private rights are secure and to some degree marketable; in other villages, individual rights are increasingly restricted and subject to more regulation and reallocation. Administrative reallocation tends to promote more equal access to land, but the price paid for the social insurance of land tenure may be forgone investment.

Under communal farm production, there was little incentive to work hard: the communal system guaranteed a livelihood, and there were few private gains from additional efforts. The reform that introduced the household responsibility system in China in the early 1980s sharpened individual work incentives by assigning specific plots and the rights to residual income to individual households.

However, the household responsibility system left unresolved questions about the reallocation of land over time - questions that have become increasingly important (for both efficiency and equity) with the rapid growth of the non-farm economy.

The authors use household and village data to show that the initially egalitarian distribution of land is becoming more dispersed over time. In what has become a hybrid property rights system, in some areas local village leaders (the cadre) were empowered to periodically redistribute land between households on the basis of economic and demographic changes among households. In other villages, households were granted much greater immunity against redistribution of any sort.

Similarly, villages differed in the degree to which individual households could trade land among themselves. Some villages did not regulate the practice, and other required village approval or prohibited land rental relationships.

The authors use simulated maximum likelihood methods to estimate hybrid panel models of the determinants of both market-based and administrative reallocation of land. They also use them to estimate the insecurity-induced investment costs of market-based reallocation of land. They find that administrative reallocation responds to the increasing inequality but non-market reallocations come at a significant cost in forgone investment.

This paper - a product of Rural Development, Development Research Group - is part of a larger effort in the group to study the determinants and impact of property rights systems and land tenure regimes in the process of development. The authors may be contacted at carter@aae.wisc.edu or yyao@ccer.pku.edu.cn.

Suggested Citation

Yao, Yang and Carter, Michael R., Market Versus Administrative Reallocation of Agricultural Land in a Period of Rapid Industrialization (November 1999). World Bank Policy Research Working Paper No. 2203. Available at SSRN: https://ssrn.com/abstract=636205

Yang Yao (Contact Author)

Peking University - China Center for Economic Research (CCER) ( email )

Beijing, 100871
China

Michael R. Carter

University of Wisconsin - Madison - Department of Agricultural & Applied Economics ( email )

427 Lorch St.
Madison, WI 53706-1503
United States
608-263-2478 (Phone)

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