The endowment effect accompanying villagers' withdrawal from rural homesteads: Field evidence from Chengdu, China

Abstract

The withdrawal from rural homesteads (WRH) refers to a mechanism to encourage villagers to withdraw from their vacant homesteads or give up their occupied homesteads (including the houses built on them) voluntarily and move into high-rise buildings with compensation. WRH aims to address inefficient utilization of rural land in China. However, the endowment effect, a behavioral tendency for villagers to value rural homesteads more highly when they own them relative to when they do not, may affect the process of implementing WRH policy. Based on survey data from 878 villagers in Chengdu, Sichuan Province, this paper estimates endowment effects for different types of villagers whose rights to their rural homesteads could be withdrawn. It then makes an empirical analysis on the differences and influencing factors of villagers’ endowment effects related to WRH via a binary logistic model querying emotional attachment, property right status, and substitutability of rural homesteads. The results show 70.62 % of sampled villagers exhibit an intensive endowment effect after WRH. Meanwhile, as non-agricultural economic activities increase, villagers’ endowment effects intensify. In terms of influencing factors, emotional attachment and cognition of inheritance rights strengthen the degree of pain experienced by villagers when they withdraw from their rural homesteads, thereby enhancing endowment effects. Property certificates and cognition of disposal rights negatively affect villagers’ endowment effects. From the perspective of villagers’ differentiation, cognition of mortgage rights intensifies the feelings of security within rural homesteads for full-time agricultural households, thereby intensifying endowment effects. Substitutability of villagers' livelihood positively affects endowment effects in full-time agricultural households and negatively affects endowment effects in non-agricultural households. This paper concludes by discussing the land use policy implications of these findings.