Designing Property Rights of Land in Rural China

Abstract

This paper takes the special features of land seriously, and study the efficient design of its property rights against the backdrop of social security. In particular, we explain why (i) tenure insecurity and (ii) restrictions on the right to transfer, two features that are often frown upon by economists, can play a positive role in an efficient design of property rights of land in rural China. Our model does reasonably well in matching the variation (across both time and regions) of China’s rural land system: tenure is more insecure and restrictions on the right to transfer more severe in inland regions (vis-a-vis coastal regions) and at earlier stages of the reform.