Property rights reform to support China’s rural - urban integration: household-level evidence from the Chengdu experiment

Abstract

In 2008, as part of a national experiment, Chengdu prefecture implemented ambitious property rights reforms including complete registration of all land together with measures to ease transferability and eliminate migration restrictions. Results from a difference-in-difference analysis of the National Statistics Bureau's regular household survey suggest that the reforms increased consumption and income, in particular for less wealthy and less educated households, with estimated benefits well above the cost of implementation. Local labour supply increased with the young shifting towards agriculture and the old towards off-farm employment. The reforms also contributed to higher agricultural yields and profits through three channels, namely: (i) greater rental market activity that transferred land to more productive producers; (ii) substitution of purchased inputs for labour; and (iii) a shift out of grains towards vegetables, corn, and oilseeds all of which offer higher levels of profitability. All of these findings are consistent with the notion that, without reforms, imperfections in factor markets undermined investment and functioning of land and labour markets, preventing high-value peri-urban land from being used most effectively and reducing job creation.