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Property Rights, Labour Markets, and Efficiency in a Transition Economy: The Case of Rural China

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Loren Brandt ()
Dwayne Benjamin ()

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Abstract

This paper investigates the consequences of imperfect and uneven factor market development for farm efficiency in rural China during transition. In particular, we estimate the extent to which an inverse relationship in farm productivity can be attributed to the administrative (instead of market) allocation of land, and the extent of unevenly developed non-agricultural opportunities. Using a recently collected household survey, we show that a considerable amount of inefficiency exists in the countryside, especially in the employment of labour. Our results show that this inefficiency is alleviated by the development of external labour markets, and that in the context of the current imperfect market environment, administrative reallocations help improve on the margin both efficiency and equity. They do not go far enough, however, which raises important questions about constraints on rental activity, the link between admin istrative reallocation and decentralized land exchange, and property rights formation more generally.

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Paper provided by William Davidson Institute at the University of Michigan Stephen M. Ross Business School in its series William Davidson Institute Working Papers Series with number 518.

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Length: 38 pages
Date of creation: 01 Mar 2002
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Handle: RePEc:wdi:papers:2002-518

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Keywords: Rural institutions; property rights; labour markets; transition economies; farm efficiency;

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Find related papers by JEL classification:
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets
Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Carter, Michael R, 1984. "Identification of the Inverse Relationship between Farm Size and Productivity: An Empirical Analysis of Peasant Agricultural Production," Oxford Economic Papers, Oxford University Press, vol. 36(1), pages 131-45, March. [Downloadable!] (restricted)
  2. Bhalla, Surjit S., 1988. "Does land quality matter? : Theory and measurement," Journal of Development Economics, Elsevier, vol. 29(1), pages 45-62, July. [Downloadable!] (restricted)
  3. Benjamin, Dwayne & Brandt, Loren, 1997. "Land, Factor Markets, and Inequality in Rural China: Historical Evidence," Explorations in Economic History, Elsevier, vol. 34(4), pages 460-494, October. [Downloadable!] (restricted)
  4. Benjamin, Dwayne, 1992. "Household Composition, Labor Markets, and Labor Demand: Testing for Separation in Agricultural Household Models," Econometrica, Econometric Society, vol. 60(2), pages 287-322, March. [Downloadable!] (restricted)
  5. Lin, Justin Yifu, 1992. "Rural Reforms and Agricultural Growth in China," American Economic Review, American Economic Association, vol. 82(1), pages 34-51, March. [Downloadable!] (restricted)
  6. Benjamin, Dwayne, 1995. "Can unobserved land quality explain the inverse productivity relationship?," Journal of Development Economics, Elsevier, vol. 46(1), pages 51-84, February. [Downloadable!] (restricted)
  7. Udry, Christopher, 1996. "Gender, Agricultural Production, and the Theory of the Household," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 1010-46, October. [Downloadable!] (restricted)
  8. Binswanger, Hans P. & Deininger, Klaus & Feder, Gershon, 1995. "Power, distortions, revolt and reform in agricultural land relations," Handbook of Development Economics, in: Hollis Chenery† & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 42, pages 2659-2772 Elsevier. [Downloadable!] (restricted)
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  9. Dwayne Benjamin & Loren Brandt & Paul Glewwe & Li Guo, 2000. "Markets, Human Capital, and Inequality: Evidence from Rural China," William Davidson Institute Working Papers Series 298, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
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  10. John C. Ham & Kevin T. Reilly, 2002. "Testing Intertemporal Substitution, Implicit Contracts, and Hours Restriction Models of the Labor Market Using Micro Data," American Economic Review, American Economic Association, vol. 92(4), pages 905-927, September. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Alan de Brauw, 2002. "Are Women Taking over the Farm in China?," Department of Economics Working Papers 199, Department of Economics, Williams College. [Downloadable!]
  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 2930, The World Bank. [Downloadable!]
  3. de Brauw, Alan, 2001. "Migration And Investment In Rural China," 2001 Annual meeting, August 5-8, Chicago, IL 20648, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  4. Li, Guo & Rozelle, Scott & Huang, Jikun, 2000. "Land Rights, Farmer Investments Incentives, And Agricultural Production In China," Working Papers 11958, University of California, Davis, Department of Agricultural and Resource Economics. [Downloadable!]
  5. Huang, Qiuqiong & Rozelle, Scott & Howitt, Richard & Wang, Jinxia & Huang, Jikun, 2006. "Irrigation Water Pricing Policy in China," 2006 Annual meeting, July 23-26, Long Beach, CA 21241, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  6. Seshan, Ganesh, 2005. "The impact of trade liberalization on household welfare in vietnam," Policy Research Working Paper Series 3541, The World Bank. [Downloadable!]
  7. Qian, Nancy, 2006. "Missing Women and the Price of Tea in China: The Effect of Sex-Specific Earnings on Sex Imbalance," CEPR Discussion Papers 5986, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  8. Dwayne Benjamin & Loren Brandt & John Giles, 2004. "The Evolution of Income Inequality in Rural China," William Davidson Institute Working Papers Series 2004-654, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  9. Sindi, Kirimi & Kirimi, Lilian, 2006. "A Test of the New Economics of Labor Migration Hypothesis: Evidence from Rural Kenya," 2006 Annual meeting, July 23-26, Long Beach, CA 21257, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  10. de Brauw, Alan & Giles, John, 2008. "Migrant labor markets and the welfare of rural households in the developing world : evidence from China," Policy Research Working Paper Series 4585, The World Bank. [Downloadable!]
    Other versions:
  11. Dwayne Benjamin & Loren Brandt & Jia-Zhueng Fan, 2003. "Ceaseless Toil? Health and Labor Supply of the Elderly in Rural China," William Davidson Institute Working Papers Series 2003-579, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  12. Deininger, Klaus & Jin, Songqing, 2006. "Securing property rights in transition: Lessons from implementation of China's rural land contracting law," 2006 Annual meeting, July 23-26, Long Beach, CA 21465, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
    Other versions:
  13. Jacoby, Hanan G. & Li, Guo & Rozelle, Scott, 2002. "Hazards Of Expropriation:Tenure Insecurity And Investment In Rural China," Working Papers 11960, University of California, Davis, Department of Agricultural and Resource Economics. [Downloadable!]
    Other versions:
  14. Ravallion, Martin & Van der Walle, Dominique, 2003. "Land allocation in Vietnam's agrarian transition," Policy Research Working Paper Series 2951, The World Bank. [Downloadable!]
  15. Karen Macours & Alain de Janvry & Elisabeth Sadoulet, 2004. "Insecurity of Property Rights and Matching in the Tenancy Market," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series 992, Department of Agricultural & Resource Economics, UC Berkeley. [Downloadable!]
  16. Lohmar, Bryan, 1999. "Land Tenure Insecurity And Labor Allocation In Rural China," 1999 Annual meeting, August 8-11, Nashville, TN 21495, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  17. Deininger, Klaus & Jin, Songqing, 2005. "Land Sales and Rental Markets in Transition: Evidence from Rural Vietnam," 2005 Annual meeting, July 24-27, Providence, RI 19359, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
    Other versions:
  18. Deininger, Klaus & Jin, Songqing, 2007. "Land rental markets in the process of rural structural transformation : productivity and equity impacts in China," Policy Research Working Paper Series 4454, The World Bank. [Downloadable!]
  19. Krug, B. & Hendrischke, H., 2006. "Institution Building and Change in China," Research Paper ERS-2006-008-ORG Revision, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni. [Downloadable!]
  20. Alan de Brauw & John Giles, 2006. "Migrant Opportunity and the Educational Attainment of Youth in Rural China," IZA Discussion Papers 2326, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
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