The shaping of an institutional choice: Weather shocks, the Great Leap Famine, and agricultural decollectivization in China

By providing more public goods (irrigation), collective agriculture can deal with negative weather shocks more effectively. Yet, collective institutions are fraught with problems of work incentives, excessive grain procurement, and the like, which in one extreme historical instance had resulted in great tragedy-China's Great Leap Famine. By exploiting the variation in the pace of agricultural decollectivization among the Chinese provinces during 1978-1984, we test the respective effects of weather shocks, the lasting impact of the Great Leap Famine, and public goods provision on the villages' institutional choice between collective and family farming. We find that bad weather at the time of decollectivization had the likely effect of strengthening the collectives, but that effect reverses in provinces that had experienced greater famine severity or had enjoyed better public goods provision.