Are private property rights better? evidence from the marketization of land rentals in rural China

Collective land property rights are the basic system in rural China, but there is debate over whether private land property rights are better at promoting land transactions and increasing farm productivity. Drawing from a quasi-experiment on ancestral land in Leizhou, a city of Guangdong province, this study analyzes the impact of ancestral land on the marketization of land rentals. The results indicate that the property rights for ancestral land tend to increase the marketization of land rentals. Specifically, compared to contracted land transactions, ancestral land transactions tend to be conducted between strangers and accompanied by a written contract, a definite contract period, and high rent. Further analysis shows that farmers with ancestral land tend to migrate and use ancestral land to produce non-grains. Moreover, farmers with ancestral land have lower interpersonal trust, which explains why they prefer market orientation over relation orientation in land rentals. Our analysis not only helps to explain the effects of varied land property rights, but also deepens the knowledge about the functions of China’s land system.