Hazards of Expropriation: Tenure Insecurity and Investment in Rural China

Authors: Jacoby H.G.; Li G.; Rozelle S.

Source: The American Economic Review, Volume 92, Number 5, 1 December 2002 , pp. 1420-1447(28)

Publisher: American Economic Association

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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.

Document Type: Forum article

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