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Market versus administrative reallocation of agricultural land in a period of rapid industrialization


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  • Carter, Michael R.
  • Yang Yao


Under communal farm production, there was little incentive to work hard: the communal system guaranteed a livelihood, and there were few private gains from additional efforts. The reform that introduced the household responsibility system in China in the early 1980s sharpened individual work incentives by assigning specific plots and the rights to residual income to individual households. However, the household responsibility system left unresolved questions about the reallocation of land over time - questions that have become increasingly important (for both efficiency and equity) with the rapid growth of the non-farm economy. The authors use household and village data to show that the initially egalitarian distribution of land is becoming more dispersed over time. In what has become a hybrid property rights system, in some areas local village leaders (the cadre) were empowered to periodically redistribute land between households on the basis of economic and demographic changes among households. In other villages, households were granted much greater immunity against redistribution of any sort. Similarly, villages differed in the degree to which individual households could trade land among themselves. Some villages did not regulate the practice, and other required village approval or prohibited land rental relationships. The authors use simulated maximum likelihood methods to estimate hybrid panel models of the determinants of both market-based and administrative reallocation of land. They also use them to estimate the insecurity-induced investment costs of market-based reallocation of land. They find that administrative reallocation responds to the increasing inequality but non-market reallocations come at a significant cost in forgone investment.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2203.

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Date of creation: 31 Oct 1999
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Handle: RePEc:wbk:wbrwps:2203

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Keywords: Labor Policies; Environmental Economics&Policies; Banks&Banking Reform; Public Sector Economics&Finance; Municipal Housing and Land; Environmental Economics&Policies; Banks&Banking Reform; Municipal Housing and Land; Urban Housing; Public Sector Economics&Finance;


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  1. McMillan, John & Whalley, John & Zhu, Lijing, 1989. "The Impact of China's Economic Reforms on Agricultural Productivity Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(4), pages 781-807, August.
  2. Putterman, Louis, 1992. "Dualism and Reform in China," Economic Development and Cultural Change, University of Chicago Press, University of Chicago Press, vol. 40(3), pages 467-93, April.
  3. Putterman, Louis, 1991. "Does Poor Supervisability Undermine Teamwork? Evidence from an Unexpected," American Economic Review, American Economic Association, American Economic Association, vol. 81(4), pages 996-1001, September.
  4. Shouying Liu & MICHAEL R. CARTER & Yang Yao, 1996. "Dimensions and Diversity of Property Rights in Rural China: Delimmas on the Road to Further Reform," Wisconsin-Madison Agricultural and Applied Economics Staff Papers, Wisconsin-Madison Agricultural and Applied Economics Department 395, Wisconsin-Madison Agricultural and Applied Economics Department.
  5. Gourieroux, Christian & Monfort, Alain, 1993. "Simulation-based inference : A survey with special reference to panel data models," Journal of Econometrics, Elsevier, Elsevier, vol. 59(1-2), pages 5-33, September.
  6. Kung, James Kaising, 1994. "Egalitarianism, subsistence provision, and work incentives in China's agricultural collectives," World Development, Elsevier, Elsevier, vol. 22(2), pages 175-187, February.
  7. Gaynor, Martin & Putterman, Louis, 1993. "Productivity consequences of alternative land division methods in China's decollectivization An econometric analysis," Journal of Development Economics, Elsevier, Elsevier, vol. 42(2), pages 357-386, December.
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Cited by:
  1. World Bank, 2001. "Mexico : Land Policy--A Decade after the Ejido Reform," World Bank Other Operational Studies 15460, The World Bank.
  2. Deininger, Klaus & Songqing Jin, 2002. "Land rental markets as an alternative to government reallocation? equity and efficiency considerations in the Chinese land tenure system," Policy Research Working Paper Series, The World Bank 2930, The World Bank.


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