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Hazards of Expropriation: Tenure Insecurity and Investment in Rural China

  • Author(s): Jacoby, Hanan G.
  • Li, Guo
  • Rozelle, Scott D.
  • et al.
Abstract

This paper uses 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.

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