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Is Prohibiting Land Reallocation Enough to Promote Development of Farmland Rental Markets in China?

Discussion Papers

No.543

November 2015

ABSTRACT

Prohibiting land reallocation improves tenure security, but it remains unclear whether this sufficiently facilitates the development of farmland rental markets in China. To fill this gap, we investigate how farmland rental activities are influenced by full-scale land reallocation (FSLR) and partial land reallocation (PLR), which differ in scale and imposition. Employing the instrumental-variables and the difference-in-differences approaches, we find that PLR substitutes relation-specific contracting in the markets, while FSLR complements arms-length contracting. The different impacts are attributable to the difference in imposition rather than scale. These findings suggest the need for further reforms.

Keywords: farmland reallocation, farmland rental market, rural China
JEL classification: O12, Q12, Q15

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