Despite the universality of household farming, land remains owned communally by members of the village community in rural China, and as such is reallocated periodically in response to demographic change. This institutional arrangement has been criticized on a number of grounds. First, the practice of periodic reallocation has given rise to tenure insecurity, and therefore discourages farmers from making plot-specific investments on their assigned plots. Second, it also frustrates households wanting to leave agriculture for off-farm work and income opportunities, insofar as land is continually reallocated via administrative means rather than through the operation of land rental markets....[ Read more ]

Despite the universality of household farming, land remains owned communally by members of the village community in rural China, and as such is reallocated periodically in response to demographic change. This institutional arrangement has been criticized on a number of grounds. First, the practice of periodic reallocation has given rise to tenure insecurity, and therefore discourages farmers from making plot-specific investments on their assigned plots. Second, it also frustrates households wanting to leave agriculture for off-farm work and income opportunities, insofar as land is continually reallocated via administrative means rather than through the operation of land rental markets.

The overriding goals of this thesis is to test these conventional wisdom using a set of unique farm survey conducted by China’s Ministry of Agriculture in 1999. We begin our analysis, in chapter two, by testing the effect of demographic and other changes on land reallocations. A unique feature of this analysis is that we divide the enumerated reallocations into full-scale and partial categories, which have different implications for tenure security. Our analysis shows that, while population growth does affect the frequency of land reallocations, its effect is confined to only those households that have been affected by demographic change, and not the rest of the community. This suggests that the perceived negative effect of periodic land reallocation has likely been overblown. This analysis also confirms a prevailing hypothesis pertaining to the virtuous effect that off-farm development has had on land reallocations. While such development has given rise to more frequent partial reallocations, it has resulted in fewer full scale readjustments. Conversely, tax burden has singularly rendered full scale land reallocations more frequently, as partial reallocation is unable to equalize the burden among all the farm households. Taken together, these findings suggest that, due possibly to the high transaction costs entailed in village-wide land reallocations, community members have collectively attempted to minimize their occurrence.

In chapter three, we fail to confirm the hypothesis that land rental transactions and administrative land reallocations are substitutes, and therefore the implication that active reallocations will likely retard the development of a land rental market, with adverse consequence for off-farm labor transfer. First of all, the regression results show that land reallocations, however measured, have no statistically significant effect on land rental transactions, whereas off-farm development does. This suggests that the development of land rental markets is likely induced by the development of an off-farm labor market, or that the two are simultaneously determined.

In chapter four, a number of hypotheses regarding the determinants of organic fertilizing practices -- a proxy of long-term, plot-specific investment -- are examined. Importantly, regardless of its magnitude, land reallocation frequency has no significant effect on fertilizing input. It is only where land reallocation occurred between the village small groups, which are typically the unit within which this exercise takes place, is the impact felt. In this instance, households are found to have invested less, a behavior that may be considered rational, insofar as they collectively perceive that their property rights, which are private for the group as a whole, are being violated. The regression results corroborate a competing hypothesis, however. Off-farm development, which is a proxy of the opportunity costs of labor, is found to have a significantly negative impact on the fertilizing practice in question. This suggests that, insofar as the practice of organic fertilizer application entails non-trivial labor input, such behavior is contingent upon the opportunity cost of labor as much as on tenure security. Other findings, most notably the positive effect of income from animal husbandry, supports further the idea that land investments are not solely determined by property rights arrangements. Chapter five provides a summary and conclusion of the study.