Is deregulation of forest land use rights transactions associated with economic well-being and labor allocation of farm households? Empirical evidence in China

Economic development literature has documented the importance of property rights of farmland for household well-being. Despite this well-supported consensus, limited empirical evidence has been provided for forestland. This study fills the gap in existing literature by identifying the determinants of forestland use rights transaction decision (FTD)–that is the decision of households to rent in or rent out the forestland. This paper also empirically assesses the association between the FTD and the economic well-being and labor allocation of households in China. Using unique survey data of 2228 households in 7 provinces of China, a multiple-choice treatment effect model was estimated to cope with potential endogeneity bias. Results indicate that forestland size, forestland fragmentation, and age and education of the household head, as well as region heterogeneity, are associated with the decision to participate in FTD. Households renting forestland from others have higher household consumption and savings than those households without forestland transaction, and households renting out forestland also have a higher level of savings. The improvement in household economic well-being due to FTD is possibly because of an efficient reallocation of family and hired labor as well as a higher likelihood to receive policy financial loans on forest production.