土地出租市场替代政府再分配？中国土地租赁体制的平等和效率问题

POLICY RESEARCH WORKING PAPER 293 0 Land Rental Markets as an Alternative to Government Reallocation? Equity and Efficiency Considerations in the Chinese Land Tenure System Klatus Deuiinger Sonigqi7g j17 The World Bank Development Research Group U Rural Development November 2002  POLIcy RESEARCH WORKING PAPER 2930 Abstract Deininger and Jin develop a model of land leasing with endowments but that land rental markets are more agents characterized by unobserved heterogeneity in effective in doing so and also have a larger productivity- ability and presence of an off-farm labor market. In this enhancing effect than administrative reallocation, case, decentralized land rental may contribute to equity implying that more active land rental markets would and efficiency goals and may have several advantages allow producers to realize significant productivity gains. over administrative reallocation. The extent to which this At the same time, the presence of a large number of is true empirically is explored using data from three of producers whose participation in rental markets remains China's poorest provinces. The authors find that both constrained suggests that efforts to reduce transaction processes redistribute land to those with lower costs in land rental markets would be warranted. This paper-a product of Rural Development, Development Research Group-is part of a larger effort in the group to assess the impact of policy on land markets. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Maria Fernandez, room MC3-542, telephone 202-473-3766, fax 202-522-1151, email address mfernandez2@worldbank.org. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. Theauthorsmay be contacted at kdeininger@worldbank.orgorsjin@worldbank.org. November 2002. (39 pages) The Policy Research Working Paper Series disseminates the findmigs of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the finditgs out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should he cited accordingly. The fi,idings. interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the vieiv of the World Bank, its Executive Directors, or the countries they represent Produced by the Research Advisory Staff  Land rental markets as an alternative to government reallocation? Equity and efficiency considerations in the Chinese land tenure system Klaus Deininger*l Songqing Jin World Bank ** UC Davis lCorrespondance- kdeininger(aworldbankorg 1818 H St NW, Washington DC 20433, Tel 202 473 0430; Fax 202 522 1150 We thank China's State Statistical Bureau, in particular Zude Xie, Pingping Wang, Xinhua Yu, and CCER, especially Yang Yao, Justin Lin and Jing Li for making available the data and assisting in the survey underlying this analysis We are also grateful for the helpful commnents from Keijiro Otsuka, Scott Rozelle and Michael Carter. Support from the Norwegian ESSD Trust Fund (Environment Window) is gratefully acknowledged.   Land rental markets as an alternative to reallocation? Equity and efficiency considerations in the Chinese land tenure system Abstract: We develop a model of land leasing with agents charactenzed by unobserved heterogeneity in ability and presence of an off-farm labor market. In this case, decentralized land rental may contnbute to equity and efficiency goals and may have several advantages over administrative reallocation The extent to which this is true empincally is explored using data from three of China's poorest provinces We find that both processes redistrbute land to those with lower endowments but that land rental markets are more effective in doing so and also have a larger productivity-enhancing effect than admrnistrative reallocation implying that more active land rental markets would allow producers to realize significant productivity gains At the same time, the presence of a large number of producers whose participation in rental markets remains constrained suggests that efforts to reduce transaction costs in land rental markets would be warranted 1. Introduction Given the importance of land access for the efficiency of agricultural production and household investment incentives, how land is distnbuted and the way in which markets for land function will have important implications for food security and income growth, and thus the broader development process at both the household and the national level. China is of particular interest in this context because it is characterized by a highly egalitarian structure of land ownership whereby, after the introduction of the household responsibility system in the late 1970s and early 1980s, land was defacto allocated on a per capita basis (Brandt et al. 2002). As a consequence, and contrary to what is found virtually everywhere in the world, the distribution of land in China is more egalitarian than the distnbution of income and land continues to perform an essential function as a social safety net. Even though the land area cultivated per household is small by intemational comparison,' the fact that every household owns enough land to at least grow their own food in times of cnsis has a significant impact on the ability of households to smooth consumption. This has been credited as a key factor in allowing China to achieve much higher levels in terms of human development indicators (e.g. infant mortality, stunting, women's literacy) than other countries at comparable levels of economic development characterized by more inegalitarian structure of land ownership (Burgess, 2001). While the benefits from an egalitarian land ownership distribution are widely recognized, whether additional interventions by govemment may be needed to maintain the equality of opportunity that is implied in such equal access to the main non-labor means of production is an issue that has attracted considerable debate among researchers as well as policy makers. In fact, fears that "market outcomes" may undermine basic equity objectives have led most villages in China to resort to periodic administrative redistribution of land, a practice that is viewed approvingly by a wide range of academics and researchers The average per capita land endowment is less than one mu (one fifteenth of a hectare), generally split up into about 9-10 parcels (Wen 1996). 2  (Kung 1994; Dong 1996; Turner et al. 1998; Benjamin and Brandt 1998). In order to assess whether such a practice may be justified or even needed, it is important to be aware of the altematives to administrative reallocation of land and, in addition to connparing administrative to market-based land reallocation, to be able to construct a realistic counterfactual to administrative intervention in the land market, something that has proven difficult in the existing literature. In this paper, we use micro data from about 1,000 households in three of China's poorest provinces to explore three questions relating to the scope and productivity impact of different methods of land reallocation. First, we are interested to find out whether concerns about potential negative equity implications from "unchecked" functioning of land r ental markets are justified. To do so, we compare land rental markets and administrative processes with in terms of the total amount of land they were able to reallocate and the characteristics, in terms of total land ownedl and agricultural productivity, of recipients. We find not only that, in terms of quantity, rental markets have recently become more important than administrative reallocation, but also that markets and administrative mechanisms tend to transfer land to more productive and poorer households. This would suggest that there is little reason to be concerned about potential negative effects of the emergence of rental markets as, with more and more off-farm migration and non- farm employment, the need for reallocation of land increases. This conclusion is reinforced by the fact: that, according to our regressions, land markets seem to be better than bureaucrats in transferring land to poor and more efficient producers, i.e. those with small land endowments and high levels of agricultural ability, implying that such land markets conbtibute to higher productivity and greater equity. A second question is whether land markets allow households to make all the transactions they desire or whether, for example as a result of transaclion costs, some households are either completely rationed out of such markets or are only able to realize rnuch less than the desired number of land transactions. This translates inlo the question of determinants of supply of and demand for land rental. To explore this question, and make inferences about the presence and extent of market imperfections and transaction costs in these markets as well as policies that could help reduce them, we analyze data on hypothetical land transactions available from the survey. We find evidence for considerable rationing even at the prevailing rental price as the amount of land that villagers would want to exchange is consistently highe:r than what is actually observed. Irn fact, non-parametric regressions confirm that the difference between desired and actual participation in land rental markets increases with households' agricultural ability, suggesting that reducing rationing would ]lead to clear improvements in productivity. A closer look at household specific and village level factors that affect participation in rental markets helps uncover potential areas for policy intervention. It reveals that whether land rental is allowed at the village level, the dependence of the village economy on agriculture, possession of non-agricultural assets, past rental 3  experience, and village level activity of rental markets all increase the scope for rental markets, in terms of participation as well as area transacted. Analysis of the characteristics of households which are constrained on the supply side of the market reveals that eliminating obstacles to rental market participation, for example through clanfication of rental rights at the village level will allow younger and more productive households with higher level of agricultural assets but no migration experience to access land, something that would clearly increase overall productivity. If, as asserted above, better functioning of rental markets will enhance both productivity and equity, it would be of great interest to quantify the associated impacts. To do so, we simulate the changes in output net of vanable production cost that could be realized from better functioning of land markets. We find that, even without changes in rental rates, realization of all desired transactions would double the share of producers participating in rental markets to almost 25% and participating producers would increase their level of agricultural production by almost 70%. Reduction of rental rates by one third would have an even more dramatic effect; the share of producers participating in rental markets would increase to almost 40% and the increase in social welfare would amount to five times what is currently realized. Comparing the social benefits that could be achieved by improved functioning of land rental markets to the gains realized from administrative reallocation, illustrates the potential importance of rental markets. Unconstrained rental markets would be associated with a more than nine-fold increase in social benefits with another tripling of these benefits from reduced rental prices. As the scope for exchanges of land increases with development of the off-farn economy, higher levels of education, and increased accumulation of non- farm assets, it will be more and more difficult to rely on direct redistribution as the sole means to maintain an optimal operational land distribution. In this context, measures to improve the functioning of rental markets could help to increase productivity and ensure that China's equitable land ownership distribution will be most efficiently utilized. The paper is structured as follows: Section two reviews the literature and develops a model and an estimation strategy to analyze land rental market decisions in a framework with off-farm employment opportunities, transaction costs, and unobserved agricultural ability. Section three discusses data sources and provides evidence on descnptive statistics as well as the distribution of agricultural ability across producers. Section four discusses empirical results by comparing the determinants of administrative and market-based land reallocations, assessing the factors underlying hypothetical market participation, and quantifying the gains from better functioning of land rental markets. Section five concludes with policy implications. 4  :2. Backgrounid and conceptual model While the literature has long emphasized the importance of a possible investment disincentive effect derived from insecure land tenure, relatively less attention has been devoted to the allocative impact of land tenure arrangements. Focusing on the latter may be important not only because accumulating empincal evidence suggests that the magnitude of the investment disincentive effect may be small but also because adjustments through markets are likely to become more important as the rural non-farm economy develops and households increasingly migrate to urban areas. To do so, we develop a model of agricultural production and land rmarket participation that allows us to derive comparative statics and hypotheses that can be tested with our data. 2.1 Investmeint and allocative dimensions o' land tenure 'We distinguish two main channels through which land redistribution could affect productive efficiency and household welfare: an investment disincentive effect; and an allocative effect. According to the investment disincentive effect, which has received by far the greatest attention in the literature, the scope for continuing redistribution of land is likely to adversely affect investment incentives because households would not invest in lancl that might be expropriated after the investment has been made (Besley 1995). The presence and magnitude of such an effect has been studied in a large literature on virtually e very continent (Soule et al., 2000; Fearnside 2001; Place and Otsuka 2001; Place and Migot- Adholla 1998; Binswanger et al. 1995; Btruce and Migot-Adholla 1994; Feder and Onchan 1987). ]Recently, a number of contributions have explored how land tenure security may affect land-related investment in China (Li et al., 1998; Brandt et al., 2002; Jacoby et al., 2001). The majority of these studies finds that better definition of land rights does increase producers propensity to invest but that the imagnitude of such investment is quite small. There are two main reasons that might underlie such a finding. On the one hand, partly clue to depiressed prices for agricultural output, returns to agricultural cultivation are currently quite low implying that, even with higher levels of tenure security and the associated increased returns to investment, it may not be profitable to undertake such investment (Kung 1995). On the other hand, it may be that, with community-based mechanisms to secure property rights to [land-related investments at the local level, the added security provided by formalization of such property rights may be limited. This would be reinforced by the fact that investment is undertaken mostly on upland and undeveloped "wasteland" which, by definition, is not subject to redistribution by village authorities. Sach an explanation would be consistent with experience from other countries where, even though land can not be owned individually., individual property rights to land-related improvements are universally recognized, very secure, and can lbe enforced at relatively low cost (Platteau 2000). Although this does not imply that institutions to check village leaders' abuses of their ability to redistribute land 5  would not be needed (Huang 1999), it suggests that -in view of villages' apparent ability to deal with these issues in a satisfactory manner- focusing attention on the investment-impact of efforts to enhance the security of property rights alone is unlikely to bring about large increases in productivity. A second set of concerns revolves around the allocative impact of land redistribution. The underlying idea is that, in a dynamic economic environment that is characterized by increasing levels of off-farm employment and rural-urban migration, transfer rights are likely to become more important in the future (Carter and Yao 1999a). Therefore, and irrespectively of the ownership distribution of land, efficient mechanisms to transfer land from less to more efficient producers would become increasingly important to ensure an efficiency-maximizing operational land distnbution. 2 Administrative processes of reallocation are normally slow, associated with high transaction costs, infrequent, and possibly subject to bureaucratic inefficiencies and rent-seeking behavior (Johnson 1995). Moreover, even in a closely knit and purely agrarian economy, it is unlikely that village leaders will be able to observe individual cultivators' agricultural ability and allocate land accordingly in a productivity-maximizing way. As a consequence, administrative means may be ill-suited to respond to the demand for productivity-enhancing re-allocations of land that is needed with broader economic development. Even though market-based transactions may not be costless either, it would be of great importance to compare the potential of markets to that of administrative reallocation. In fact, knowledge about the functioning of these markets and their equity and productivity impacts is quite limited. Studies indicate that many villagers express a desire for administrative redistribution in order to re-establish "appropriate" land-labor ratios (Kung and Liu 1997; Kung 2000), suggesting that there are still many mis-perceptions about the scope for land rental market operation. Partly as a result of such misperceptions and continuing interventions, rental markets do not function well (Yao 2000). In fact, it is often noted that renting out of land would be seen by the village leaders as a signal that expropriation of the land for subsequent reallocation to other villagers would be feasible (Yao, 1996). 2.2 A model of agricultural production and land market participation Suppose household i is endowed with a vector of household characteristics X (excluding agricultural ability), endowments of labor L, and cultivated land A, and agricultural production ability a, Assume that there is no farm labor market but that households have the opportunity to allocate their labor 2 It is intuitive and easy to show analytically that, in the presence of large unobserved heterogeneity across producers, maintaining an egalitarian operational distribution of land could be hugely inefficient. Well-functioning rental markets would, in such a context, be strictly Pareto improving as the rental received by infra-marginal households who decide to rent out would be higher than what they could receive from own cultivation. Effective rental markets would thus help to combine the equity benefits of an egalitarian land ownership distribution with the efficiency advantages of an "optimal" operational distnbution of land. 6  endowment between farming or, their own plot and non-farming activities at a given wage w(X), and that there are no restrictions on renting of land. This implies that household incomes can derive from three sources, farm, off-farm and rental incorrLes. Let household i's agricultural production function is characterized as af(7h0,A) where l, represents labor used in agricultural production, and Ai, land used in agricultural production. To simplify the exposition, we drop the subscript i in the subsequent discussion Let f satisfy the standard assumptions: f,. > 0, fA >0