Reallocating wealth? Insecure property rights and agricultural investment in rural China*

- In rural China, the history of land shifts under the system of periodic reallocations is correlated with current tenure security.
- A decrease in the probability of losing the current plot in a reallocation yields an increase in agricultural inputs and production.
- This suggests that small increases in the security of tenure could yield benefits in terms of greater agricultural output.

This paper evaluates the impact of village-level land reallocations in China on household economic outcomes. The primary objective is to analyze the effect of short-term differences in tenure security in the year of a reallocation, employing the past history of land shifts as a source of exogenous variation in current tenure security. The results show that a decrease in the probability of losing the current plot yields an increase in agricultural inputs and production with no change in non-agricultural investments, conditional on household fixed effects that control for any unobserved and time-invariant characteristics of the household. This suggests that even small increases in the security of tenure enjoyed by households could yield benefits in terms of greater agricultural output.