Property rights, land circulation and non-farm labor supply: Evidence from a land tenure reform in China
Presented by:
Kangli Li
Practice Job Talk
Department of Agricultural and Applied Economics
University of Wisconsin-Madison
Thursday, September 17, 2020
3:45 pm-5:15 pm
Weak land property rights cause mis-allocation of production factors in the developing world. Lacking formal protection to land use, rural households secure access to land by providing excess labor on farm, leading to an inefficient allocation of land among farmers and labor across economic sectors. Leveraging a land tenure reform in China starting in the late 1990s, I investigate if and how secure use rights increases allocative efficiency of land and labor even when private ownership is lacking. Exploiting the staggered timing of policy implementation, I find that both the proportion of rented land plots and the share of land under circulation increases. Meanwhile, rural households shift labor supply towards non-farm occupations. To examine if farmland is reallocated from less productive to more productive hands, I estimate a discrete choice model in which a land lease is further categorized based on relations between landlords and tenants. The results show that landlord-tenant matches are less driven by relations and location. I apply the same model to labor allocation, and find that household members are more likely to take a job outside their hometown relative to work locally. The paper provides new evidence on allocative efficiency gains from well-defined and secure property rights. It also provides a new method to investigate resource allocations.
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