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Dual Landownership as Tax Shelter: How Did the Chinese Solve Ricardo's Problem?

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  • Yang, Helen

Abstract

A conventional theme of the literature on customary land tenure is that multiple ownership and complex tenure systems are obstacles to agricultural development. By studying the persistence of dual landownership in preindustrial China, I hypothesize that complex property norms could be the endogenous outcome of collective choice under institutional constraints, thus may not be inefficient per se. Dual ownership acted as a tax shelter for heavily taxed peasants who colluded with lightly taxed gentry to maximize the value of land. I show empirically that as gentry's tax privilege declined after the tax reform, peasants started to consolidate landownership.The dual owner system provided a solution to the land-use- inefficiency problem emphasized by David Ricardo: Under unequal taxation, land would end up owned by those with stronger political influence and preferential tax rates rather than by those best able to use it.

Suggested Citation

  • Yang, Helen, 2012. "Dual Landownership as Tax Shelter: How Did the Chinese Solve Ricardo's Problem?," MPRA Paper 42689, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:42689
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    File URL: https://mpra.ub.uni-muenchen.de/42689/1/MPRA_paper_42689.pdf
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    References listed on IDEAS

    as
    1. Sugato Bhattacharyya & Francine Lafontaine, 1995. "Double-Sided Moral Hazard and the Nature of Share Contracts," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 761-781, Winter.
    2. Eswaran, Mukesh & Kotwal, Ashok, 1985. "A Theory of Contractual Structure in Agriculture," American Economic Review, American Economic Association, vol. 75(3), pages 352-367, June.
    3. Barzel,Yoram, 1997. "Economic Analysis of Property Rights," Cambridge Books, Cambridge University Press, number 9780521597135.
    4. Rosenthal, Jean-Laurent & Wong, R. Bin, 2011. "Before and Beyond Divergence: The Politics of Economic Change in China and Europe," Economics Books, Harvard University Press, number 9780674057913, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Economic History; Dual Ownership; Tax Shelter; Tax Inequality; Double Cropping; Preindustrial China; Customary Tenure;

    JEL classification:

    • N45 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Asia including Middle East
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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