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Unlocking Rural Entrepreneurship Through Rural Land Mortgage: Evidence From an Institutional Reform in China

Author

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  • Zhanyu Dong
  • Zijia Chen
  • Junyou Chen
  • Guangjun Shen

Abstract

This paper examines the impact of rural land reform on rural entrepreneurship, focusing on China's pilot programme for rural land mortgage loans (RLML), which enables rural households to use their land management rights as collateral for financing. Using a unique dataset of newly registered rural businesses from 2011 to 2018, we employ a difference‐in‐differences approach refined with a ‘selection on observables’ framework. Results show that the RLML pilot significantly increased rural business creation, with a 10% higher growth in pilot counties compared to nonpilot counties. These findings are robust to various checks. Mechanism analysis suggests that the pilot promotes entrepreneurship mainly by easing financial constraints and improving rural infrastructure. However, the effects are localised, with no spillovers to urban areas or migration destinations. The pilot mainly encourages small‐scale service businesses rather than large enterprises, reflecting land fragmentation constraints. Stronger rural financial systems, supportive policies and a more developed service sector further enhance the pilot's impact on rural entrepreneurship.

Suggested Citation

  • Zhanyu Dong & Zijia Chen & Junyou Chen & Guangjun Shen, 2026. "Unlocking Rural Entrepreneurship Through Rural Land Mortgage: Evidence From an Institutional Reform in China," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 34(1), pages 137-160, January.
    • Handle: RePEc:wly:ectrin:v:34:y:2026:i:1:p:137-160
    DOI: 10.1111/ecot.70006
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