Land Rental Markets as an Alternative to Government Reallocation? Equity and Efficiency Considerations in the Chinese Land Tenure System
39 Pages Posted: 20 Apr 2016
Date Written: November 2002
Deininger and Jin develop a model of land leasing with agents characterized by unobserved heterogeneity in ability and presence of an off-farm labor market. In this case, decentralized land rental may contribute to equity and efficiency goals and may have several advantages over administrative reallocation. The extent to which this is true empirically is explored using data from three of China's poorest provinces. The authors find that both processes redistribute land to those with lower endowments but that land rental markets are more effective in doing so and also have a larger productivity-enhancing effect than administrative reallocation, implying that more active land rental markets would allow producers to realize significant productivity gains. At the same time, the presence of a large number of producers whose participation in rental markets remains constrained suggests that efforts to reduce transaction costs in land rental markets would be warranted.
This paper - a product of Rural Development, Development Research Group - is part of a larger effort in the group to assess the impact of policy on land markets.
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