The economics of land tenure and property rights in China's agricultural sector

This dissertation investigates the formation of land rights and the effects of different rights arrangements on household investment incentives. Using data from the author's village and household surveys, collected in China between 1995 and 1997, the dissertation demonstrates that nation-wide heterogeneity is a salient characteristic of China's land rights system, and that land rights mostly are determined at local level authority. In addition to demographic considerations, village leaders readjust land or impose restrictions on rental rights to encourage farmers to meet different policy targets. These findings invalidate the common perception that land rights are homogeneous in contemporary China and that central government effectively controls the rights formation.;By modeling the village leader's decision-making behavior, the dissertation develops a theory about land rights formation in rural China. The theory argues that the leader is concerned with three objectives: maximizing personal income, minimizing the enforcement cost of administrative tasks, and improving the general welfare level of villagers. The theory predicts that a leader will readjust land or impose restrictions on rental rights when he has valuable personal interests to protect, when the value of land is high enough to affect farmer behavior, and when the region lacks well-functioning labor and land markets. The results from empirical analysis support the theory's predictions.;The dissertation uses two methods to measure the effects of land rights arrangements on the investment incentives of farmers. One compares the input intensity of two different land plots cultivated by a single household; the other method directly measures the impact of land rights on input use by using input demand functions. Using household-level data, both methods show that enhanced tenure security and free land rental rights strengthen the farmer investment incentives. However, yield response and production function analysis implies that the efficiency loss of the current land policy may be modest.;The analysis conveys the difficulty of implementing a single national land rights policy. Land policies may be more effectively implemented at the local level if they account for the decision-making criteria of local leaders. China's current land system affects household production decisions, but its efficiency cost may be modest.