Property rights and market participation: evidence from the land titling program in rural China

Abstract

The incomplete and unstable property rights of farmland in rural China hinder the development of the nation’s farmland rental market. The Chinese government implemented a land titling program in 2008 and conducted several pilot programs in various provinces to remove the barriers resulting from ambiguous property rights. Using data from the China Health and Retirement Longitudinal Study, this paper investigates the effects of rural land titling on market participation in rural China. First, we provide novel evidence regarding the impact of land titling on land market participation and investigate the heterogeneous wealth effects and geographic locations of land rental decisions. Second, we examine the endogeneity of land titling program implementation through empirical analysis. Our results indicate that clear and well-defined farmland property rights increase land rental activities and raise rental prices. We also find a significantly negative wealth effect in land transfer decisions, indicating that land titling encourages poorer farmers to rent out farmland. Land titling is found to promote land transfer, with the strongest effect in central China, and raise rental rates, with the largest increase in western China.