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  3. American Economic Review
  4. December 2002
  5. Hazards of Expropriation: Tenure Insecurity and Investment in Rural China

Hazards of Expropriation: Tenure Insecurity and Investment in Rural China

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Abstract

We use household data from northeast China to examine the link between investment and land tenure insecurity induced by China's system of village-level land reallocation. We quantify expropriation risk using a hazard analysis of individual plot tenures and incorporate the predicted "hazards of expropriation" into an empirical analysis of plot-level investment. Our focus is on organic fertilizer use, which has long-lasting benefits for soil quality. Although we find that higher expropriation risk significantly reduces application of organic fertilizer, a welfare analysis shows that guaranteeing land tenure in this part of China would yield only minimal efficiency gains.

Citation

Jacoby, Hanan, G., Guo Li, and Scott Rozelle. 2002. "Hazards of Expropriation: Tenure Insecurity and Investment in Rural China ." American Economic Review, 92 (5): 1420-1447. DOI: 10.1257/000282802762024575

JEL Classification

  • P26 Socialist Systems and Transitional Economies: Political Economy; Property Rights
  • P32 Collectives; Communes; Agriculture
  • Q15 Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment