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Hazards of Expropriation: Tenure Insecurity and Investment in Rural China

  • Hanan G. Jacoby
  • Guo Li
  • Scott Rozelle

We use household data from northeast China to examine the link between investment and land tenure insecurity induced by China's system of village-level land reallocation. We quantify expropriation risk using a hazard analysis of individual plot tenures and incorporate the predicted "hazards of expropriation" into an empirical analysis of plot-level investment. Our focus is on organic fertilizer use, which has long-lasting benefits for soil quality. Although we find that higher expropriation risk significantly reduces application of organic fertilizer, a welfare analysis shows that guaranteeing land tenure in this part of China would yield only minimal efficiency gains.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/000282802762024575
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 92 (2002)
Issue (Month): 5 (December)
Pages: 1420-1447

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Handle: RePEc:aea:aecrev:v:92:y:2002:i:5:p:1420-1447
Note: DOI: 10.1257/000282802762024575
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