1. Klaus Deininger Songqing Jin Shouying Liu Ting Shao Fang Xia
Impacts of Property Rights Reform in Peri-Urban China: Evidence from the Chengdu National Experiment
Klaus Deininger
Songqing Jin
Shouying Liu
Ting Shao
Fang Xia

2. Motivation and Background
Challenges of China’s current land policy
The separation of land markets between rural and urban create serious problems for China’s future economic development:
Over-supply of land at low-cost to attract industries that is then linked to sprawl, high cost of infrastructure provision; conflictive conversion of rural land for industrial purposes;
Farmers under-compensated; benefit from industrialization and land value increases not shared by rural residents; long-term investment and agricultural productivity undermined (out of fear of conversation); social unrests ensured.
Reform piloted in various areas with the following objectives:
Equal rights and opportunities for state-owned and collectively owned land and land owners;
Integration of rural and urban land markets;
Fair sharing of incremental land values brought about by urbanization and construction of infrastructure.

3. The Chengdu Experiment
Chengdu prefecture was, in 2008, named as a pilot area for the comprehensive reform.
Chengdu prefecture includes 20 counties/districts and has a total area of 12,000 km2, and a total population of 11 million, of which 5 million are categorized as rural residents.
Three key changes were introduced.
A participatory effort to title all land (agricultural, residential construction, forest, and waste) and to establish a registration system to accompany it was implemented and has been completed.
Tradable development rights were introduced to allow voluntary, market-driven access to land for non-agricultural purposes.
Hukou restrictions forcing rural residents to give up their agricultural or construction land when acquiring urban residency were eliminated and regulations to allow easier transfers of rural construction land were passed.

4. Some arguments on the relationship between security of tenure and development
Besley (1995) proposed three theoretical arguments that secure property rights can affect development: free from expropriation argument, gains from trade argument, and collateral-based argument.
Besley ahd Ghatak (2009) reclassify Besley’s original arguments into two broad categories that limiting experopriation (incentivizing investment; reducing devoting private resources to guard property) and facilitating market transactions (facilitating trade in assets and improving collaterability of assets).
Eric Field (2004), and De Janvry et al. (2015) focus on the role of property rights on transformation through labor market development.
North (1990), Feder and Feeny (1991), De Soto (2000) emphasize the importance of secure property rights in supporting economic development. Acemoglu et al (2001), Banerjee and Iyer (2004) suggest that variation in property rights across countries led to significant differences in subsequent development.
Empirical evidence on effects of land titling, however, is quite mixed (Migot-Adholla et al. 1994, Place and Otsuka 2001).

5. Hypothesized impacts of the Chengdu experiment
We expect the reform to lead to
a reduction in the extent of expropriations and reallocations;
an activation of informal and formal land rental markets;
greater efficiency in allocation of land, particularly for non-needed residential land;
an increase in enterprise formation and economic activity;
a higher level of agricultural productivity and household welfare.

6. Anecdotal Evidence on impacts of the Chengdu Experiment
The experiment has drawn great attentions from policy makers, scholars and media inside and outside of China
Anecdotal evidence suggests positive reform effects.
Significant income effects (Wu 2010; Zhang, Li, Zhen 2012); increased income from land leases, local off-farm and migration;
And significant increase in land transfer (to agricultural companies), significant local employment generated
Reform also encouraged migration as farmers are not worrying about losing their land (Li 2012).
While little mortgage of agricultural land, 18,000 mortgages of collective construction land, with a volume of Y 3.3 billion; 2,500 mu of land converted back agriculture cultivation with development rights transferred

7. Village-Level Analysis
A village survey administered by DRC (Development Research Center, the State Council) in May 2014.
Regression discontinuity design
288 villages inside Chengdu (the treated group) and 241 villages outside Chengdu (the control group).
Villages were selected along the boundary separating Chengdu preference from its neighboring prefectures (see a sketch on next slide)
Mean distance between villages on both sides approx. 3 km.
Key results
Significant reduction in reallocation
Higher level of land transactions
Increased formation of agricultural enterprises
Greater use of land for agriculture & other construction

8. Geographical Discontinuity Design

9. Empirical Strategies (village level)
Difference-in-difference (DID) approach:
A standard DID compares outcome variables between treatment and control villages before- ( ) and after- ( ) the reform.
A DID with block fixed effect compares the outcome variables between treated and control villages within the same neighborhood constructed by the geographic distance (10-30 km) before and after the reform.
Placebo tests compares the outcomes between two pre-treatment periods ( vs ).

10. Nature of the Certification Process

11. Table 2: Characteristics for villages inside and outside the Chengdu Pref. before the program ( )

12. Table 3: Impact of reform on threats to tenure security (Village)

13. Table 4: Impact of reform on shares of land used for different purpose (village)

14. Table 5: Impact of reform on land transfers (village)

15. Table 6: Impact of reform on new enterprise startups (village)

16. Household-Level Analysis
Household panels from income and consumption survey conducted annually by the National Bureau of Statistics.
Purpose: Get at income effect
Sample size:
7 counties (3 inside Chengdu and 4 outside Chengdu); representative villages were randomly selected within each county; 10 households were randomly drawn from each selected village.
Panel periods (two separate representative panels):
Pre-reform panel ( ): 274 treated (inside) and 442 non-treated households (outside Chengdu).
A panel from post-reform period ( ) includes 251 treated households and 367 non-treated households.
Key variables and results:
Significant increase in yield and agric. income
Consumption increase by about 5%
This increase was strongly pro-ppor

17. Household-Level Sample

18. Empirical Strategies (HH level analysis)
A Quasi DID approach including
difference between treated and non-treated households.
Change between pre- and post-reform periods ( panel vs panel).
Heterogeneous impacts in terms of initial human capital and physical assets.

19. Table 8: Impact of reform on overall household welfare (HH level):

20. Table 9: Impact of reform on time use

21. Table 10. Impact of reform on agricultural productivity

22. Table 11. impact of reform on crop choice

23. Conclusion and Policy Implication
Land reform has significantly enhanced tenure security and reduced land expropriation.
Land reform promote formal and informal land transfers of arable land. Land reform also increases the terms of informal transfers by reducing free transfers and increasing rental transfers with outsiders.
Land reform also increased the start-up of local agricultural enterprises (floral, large-scale horticulture plantation, etc.).
Land reform significantly increased the total amount of arable land and to some extent the construction land, but significantly reduced residential land.
Reform significantly increased non-labor input use and productivity but significantly reduced labor use in agricultural production. Those with less education and more production assets benefited proportionately more from the reform. This is expected as those who are less educated and have more production assets have comparative advantage in farming.
Reform motivated farmers to shift from traditional crops to high valued crops
Reform also significantly increased the total consumption of those with less education and fewer assets.