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Rural to urban land conversion in China — How large is the over-conversion and what are its welfare implications?

Author

Listed:
  • Tan, Rong
  • Qu, Futian
  • Heerink, Nico
  • Mettepenningen, Evy

Abstract

The current system of converting farmland to urban land use in China can be characterized as a hybrid system that combines government controls with market-based transfers. In this paper we argue that this hybrid governance structure causes an over-conversion of farmland from the rural to the urban sector, as compared to a competitive market situation, and a welfare reallocation that discriminates against farmland owners. We develop a partial equilibrium model that can be used to examine the impact of the current hybrid governance structure on the over-conversion of farmland and to analyze the welfare changes for different groups of actors and the resulting net social welfare loss. Using a dataset with detailed information on farmland acquisitions and urban land transactions in Yingtan City in Jiangxi Province, we illustrate how this framework can be applied. Our results indicate an over-conversion of 33.5% of the total converted farmland in this city between 1999 and 2003. The welfare of farmland owners affected by the conversion decreased by 1.38billion RMB, while the net social welfare loss equaled more than 270million RMB during the same period. The local government obtained 380million RMB of revenues by re-selling farmland as urban land through competitive conveyance mechanisms between 2002 and 2005, while the manufacturing sector gained an estimated 280million RMB from buying land use rights at relatively low prices. We conclude that the current policy of increasing urban land conveyance through competitive mechanisms does not address two major underlying causes of over-conversion, and that protection of farmland would be better served by replacing the current hybrid rural to urban land market structure by a competitive land market.

Suggested Citation

  • Tan, Rong & Qu, Futian & Heerink, Nico & Mettepenningen, Evy, 2011. "Rural to urban land conversion in China — How large is the over-conversion and what are its welfare implications?," China Economic Review, Elsevier, vol. 22(4), pages 474-484.
  • Handle: RePEc:eee:chieco:v:22:y:2011:i:4:p:474-484
    DOI: 10.1016/j.chieco.2011.07.013
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    References listed on IDEAS

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    1. Chengri Ding & Erik Lichtenberg, 2011. "Land And Urban Economic Growth In China," Journal of Regional Science, Wiley Blackwell, vol. 51(2), pages 299-317, May.
    2. Lichtenberg, Erik & Ding, Chengri, 2009. "Local officials as land developers: Urban spatial expansion in China," Journal of Urban Economics, Elsevier, vol. 66(1), pages 57-64, July.
    3. Rong Tan & Volker Beckmann, 2010. "Diversity of practical quota systems for farmland preservation: a multicountry comparison and analysis," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 28(2), pages 211-224, April.
    4. Guangzhong Cao & Changchun Feng & Ran Tao, 2008. "Local "Land Finance" in China's Urban Expansion: Challenges and Solutions," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 16(2), pages 19-30.
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    Cited by:

    1. repec:pal:palcom:v:4:y:2018:i:1:d:10.1057_s41599-018-0081-0 is not listed on IDEAS
    2. Min Jiang & Liangjie Xin & Xiubin Li & Minghong Tan, 2016. "Spatiotemporal Variation of China’s State-Owned Construction Land Supply from 2003 to 2014," Sustainability, MDPI, Open Access Journal, vol. 8(11), pages 1-16, November.
    3. repec:gam:jsusta:v:9:y:2017:i:5:p:824-:d:98700 is not listed on IDEAS
    4. repec:gam:jsusta:v:10:y:2018:i:6:p:1766-:d:149367 is not listed on IDEAS
    5. Deininger,Klaus W. & Jin,Songqing & Liu,Shouying & Shao,Ting & Xia,Fang, 2015. "Impact of property rights reform to support China?s rural-urban integration : village-level evidence from the Chengdu national experiment," Policy Research Working Paper Series 7389, The World Bank.
    6. Shiqiang Du & Peijun Shi & Anton Van Rompaey, 2013. "The Relationship between Urban Sprawl and Farmland Displacement in the Pearl River Delta, China," Land, MDPI, Open Access Journal, vol. 3(1), pages 1-18, December.
    7. Deininger, Klaus & Jin, Songqing & Liu, Shouying & Xia, Fang, 2015. "Household-level impacts of property rights reform in peri-urban China: Evidence from the Chengdu National Experiment," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205753, Agricultural and Applied Economics Association.
    8. Ying Liang & Demi Zhu, 2015. "Subjective Well-Being of Chinese Landless Peasants in Relatively Developed Regions: Measurement Using PANAS and SWLS," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 123(3), pages 817-835, September.
    9. Qu, Song & Heerink, Nico & Xia, Ying, 2015. "Farmers' satisfaction with compensation for farmland expropriation in China--Evidence from micro-level data," 2015 Conference, August 9-14, 2015, Milan, Italy 212702, International Association of Agricultural Economists.
    10. Deininger,Klaus W. & Jin,Songqing & Liu,Shouying & Xia,Fang, 2015. "Impact of property rights reform to support China?s rural-urban integration : household-level evidence from the Chengdu national experiment," Policy Research Working Paper Series 7388, The World Bank.
    11. Qu, Futian & Kuyvenhoven, Arie & Shi, Xiaoping & Heerink, Nico, 2011. "Sustainable natural resource use in rural China: Recent trends and policies," China Economic Review, Elsevier, vol. 22(4), pages 444-460.
    12. Xianlei Ma & Nico Heerink & Ekko Ierland & Xiaoping Shi, 2016. "Land tenure insecurity and rural-urban migration in rural China," Papers in Regional Science, Wiley Blackwell, vol. 95(2), pages 383-406, June.
    13. Pan, Jiun-Nan & Huang, Jr-Tsung & Chiang, Tsun-Feng, 2015. "Empirical study of the local government deficit, land finance and real estate markets in China," China Economic Review, Elsevier, vol. 32(C), pages 57-67.
    14. Xianlei Ma & Justus Wesseler & Nico Heerink & Futian Qu, 2013. "Land Tenure Reforms and Land Conservation Investments in China ¨C What Does Real Option Value Theory Tell Us?," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 19-33, August.
    15. Lu Zhang & Hongru Du & Yannan Zhao, 2016. "Game Behavior Analysis between the Local Government and Land-Lost Peasants in the Urbanization Process," Sustainability, MDPI, Open Access Journal, vol. 8(12), pages 1-15, November.
    16. Wu, Yan & Heerink, Nico, 2016. "Foreign direct investment, fiscal decentralization and land conflicts in China," China Economic Review, Elsevier, vol. 38(C), pages 92-107.
    17. Dong, Yilin, 2016. "A note on geographical constraints and housing markets in China," Journal of Housing Economics, Elsevier, vol. 33(C), pages 15-21.

    More about this item

    Keywords

    Farmland conversion; Land market; Quota system; Market economy; Social welfare;

    JEL classification:

    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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