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.