Hazards of Expropriation: Tenure Insecurity and Investment in Rural China

Hanan Jacoby, Guo Li and Scott Rozelle

American Economic Review, 2002, vol. 92, issue 5, 1420-1447

Abstract: We use household data from northeast China to examine the link between investment and land tenure insecurity induced by China's system of village-level land reallocation. We quantify expropriation risk using a hazard analysis of individual plot tenures and incorporate the predicted "hazards of expropriation" into an empirical analysis of plot-level investment. Our focus is on organic fertilizer use, which has long-lasting benefits for soil quality. Although we find that higher expropriation risk significantly reduces application of organic fertilizer, a welfare analysis shows that guaranteeing land tenure in this part of China would yield only minimal efficiency gains.

Date: 2002
Note: DOI: 10.1257/000282802762024575
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Working Paper: HAZARDS OF EXPROPRIATION:TENURE INSECURITY AND INVESTMENT IN RURAL CHINA (2002)
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