How do Payments for Environmental Services Affect Land Tenure? Theory and Evidence From China

Recent academic endeavours have questioned whether the rapidly unfolding Payments for Environmental Services (PES) may have profound influence on land tenure which would in turn impact the conservation efficacy of PES. This paper developed a game-theory model in the context of rural China, which describes the endogenous formation of land rights as a bargaining process between ordinary villagers and village leaders. This model gave rise to theoretical predictions pertaining to the implications of two PES schemes in China for land tenure, namely the Sloping Land Conversion Programme (SLCP) and the Ecological Public-Benefit Forest Compensation Programme (EPBFCP). The theoretical predictions were tested using primary data collected through large-scale field surveys. These data were analysed using the Propensity Score Matching method and panel data models. Both the theoretical analysis and the empirical results find that the SLCP has likely enhanced land tenure security by increasing the bargaining costs of village leaders' attempts to reallocate SLCP lands to other households. On the other hand, villagers tend to have less motivation to de-collectivise those forest lands enrolled in the EPBFCP, which somewhat stands in the way of the country's agenda to further de-collectivise communal forests and allocate them to individual households.