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Property Rights, Labour Markets, and Efficiency in a Transition Economy: The Case of Rural China

  • Loren Brandt

    ()

  • Dwayne Benjamin

    ()

This paper investigates the consequences of imperfect and uneven factor market development for farm efficiency in rural China during transition. In particular, we estimate the extent to which an inverse relationship in farm productivity can be attributed to the administrative (instead of market) allocation of land, and the extent of unevenly developed non-agricultural opportunities. Using a recently collected household survey, we show that a considerable amount of inefficiency exists in the countryside, especially in the employment of labour. Our results show that this inefficiency is alleviated by the development of external labour markets, and that in the context of the current imperfect market environment, administrative reallocations help improve on the margin both efficiency and equity. They do not go far enough, however, which raises important questions about constraints on rental activity, the link between admin istrative reallocation and decentralized land exchange, and property rights formation more generally.

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File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp518.pdf
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Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 518.

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Length: 38 pages
Date of creation: 01 Mar 2002
Date of revision:
Handle: RePEc:wdi:papers:2002-518
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  1. Benjamin, Dwayne & Brandt, Loren, 1997. "Land, Factor Markets, and Inequality in Rural China: Historical Evidence," Explorations in Economic History, Elsevier, vol. 34(4), pages 460-494, October.
  2. Lin, Justin Yifu, 1992. "Rural Reforms and Agricultural Growth in China," American Economic Review, American Economic Association, vol. 82(1), pages 34-51, March.
  3. Dwayne Benjamin & Loren Brandt & Paul Glewwe & Li Guo, 2000. "Markets, Human Capital, and Inequality: Evidence from Rural China," William Davidson Institute Working Papers Series 298, William Davidson Institute at the University of Michigan.
  4. Binswanger, Hans P. & Deininger, Klaus & Feder, Gershon, 1995. "Power, distortions, revolt and reform in agricultural land relations," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 42, pages 2659-2772 Elsevier.
  5. Benjamin, Dwayne, 1992. "Household Composition, Labor Markets, and Labor Demand: Testing for Separation in Agricultural Household Models," Econometrica, Econometric Society, vol. 60(2), pages 287-322, March.
  6. Udry, Christopher, 1996. "Gender, Agricultural Production, and the Theory of the Household," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 1010-46, October.
  7. Carter, Michael R, 1984. "Identification of the Inverse Relationship between Farm Size and Productivity: An Empirical Analysis of Peasant Agricultural Production," Oxford Economic Papers, Oxford University Press, vol. 36(1), pages 131-45, March.
  8. Matthew A. Turner & Loren Brandt & Scott Rozelle, 1999. "Property Rights Formation and the Organization of Exchange and Production in Rural China," William Davidson Institute Working Papers Series 250, William Davidson Institute at the University of Michigan.
  9. Bhalla, Surjit S., 1988. "Does land quality matter? : Theory and measurement," Journal of Development Economics, Elsevier, vol. 29(1), pages 45-62, July.
  10. Benjamin, Dwayne, 1995. "Can unobserved land quality explain the inverse productivity relationship?," Journal of Development Economics, Elsevier, vol. 46(1), pages 51-84, February.
  11. John C. Ham & Kevin T. Reilly, 2002. "Testing Intertemporal Substitution, Implicit Contracts, and Hours Restriction Models of the Labor Market Using Micro Data," American Economic Review, American Economic Association, vol. 92(4), pages 905-927, September.
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