Property rights system and market evolution: Plot-level evidence from China’s land titling

Abstract

Property rights and market transactions have constantly been a core topic in development economics, but existing studies rarely, especially using fine-grain data, examine the impact of property rights system reform on land market evolution. Based on the natural experiment of China’s land titling and 3053 transferred plots in Yangshan County, we employ a fixed effect model to identify this impact. We find that land titling promotes the marketization of land transfer, enabling it to evolve from relational trust to formal contracts. Specifically, land titling increases the probability of households signing land transfer contracts, especially written contracts with legal force. It also stimulates households to transfer their land to non-acquaintances, to charge rents, and to determine a specific duration. Land titling’s impact is primarily achieved by its improvement in the exclusivity, stability, and clarity of land rights. This impact is constrained by the characteristics of plots and households. Households are conservative about the marketization of larger plot transfers. Better irrigation conditions and higher off-farm migration are associated with deeper marketization of land transfer. This evidence emphasizes that land titling, as a combination of technology and institutions, can effectively reduce transaction costs and improve the efficiency of land use.