Land tenure and productivity: evidence from rural China

Abstract

For the 640 million farmers (i.e. 47% of the total population) living in rural China as of 2012, land is a resource of significant value. China has experimented with different forms of land tenure arrangements, which have been widely recognised as being vital to the productivity of agriculture which in turn is critical to poverty alleviation. The changes in land tenure arrangements over the past half a century have included a shift from privately owned to collectively owned land, from the offer of 15-year use rights to perpetual use rights to the land under cultivation, from the issue of informal land certificates to the currently (i.e. as of 2014) ongoing formal land certification program (RLRC). All these changes have the potential to affect farm productivity and thus impact rural poverty. This thesis aims to examine how the changing land tenure arrangements have affected productivity at the level of individual farms, and the policy lessons on how to improve productivity and household income. To answer the aforementioned questions, two levels of research were conducted. Firstly, data at the level of the 31 provinces over a 60-year period was analysed to investigate the link between grain productivity and land tenure arrangements. The findings show that land tenure dummies that stand for land use rights and the right to transfer rights to use the land have had positive effects on grain productivity. Secondly, farm-level data was collected via a purpose-designed survey. This data was analysed using regression and matching methods on certified and uncertified plots. The quantitative estimates on the impact of land certification on farm-level productivity and income shows that use rights secured through certification induces farmers to: (i) invest more in land; (ii) transfer land to more productive farmers, thereby increasing land productivity; and, (iii) participate in the land rental markets which contributes to household income and improves allocative efficiency. In summary, the thesis is that land tenure reform is critical to growth in productivity and income for small holders. These findings lend support to the ongoing land reforms throughout China.