The impact of land expropriation on household relative economic deprivation in rural China: The roles of livelihood strategies and heterogeneity

Relative deprivation shapes household behavior, yet its determinants remain underexplored. Land expropriation, a widespread and often contentious policy in developing countries, offers a unique setting to examine this relationship. This paper studies the causal impact of land expropriation on household relative economic deprivation. By leveraging land expropriation in rural China as a quasi-natural experiment and applying two-way fixed effects models to nationally representative panel data, we find a 6.8 % decline in relative deprivation among affected households, but the effect is short-lived, dissipating within three years. Mechanism analyses suggest that this temporary reduction is mainly driven by disproportionate increases in property income and transfer payments, while long-term occupational shifts play a limited role. Heterogeneity analyses further indicate stronger effects among households with greater human or social capital, but weaker effects where land institutions are more developed. These results underscore the need for policies that foster long-term income growth beyond short-term compensation.