Impact of Market-Oriented Policy Reforms on Households in Rural China

Ref. no. 677-16

In the 1980s China dismantled the commune system, in which land was communally owned and farmed, and replaced it with the household responsibility system, in which land is leased to and worked by individual households. In the early 1980s agricultural production increased dramatically. No further large increases are expected, however, as it appears that the gains from this new policy have now been reaped.

This research project intends to obtain answers to the following questions: What are the main determinants of the productivity of agricultural households in rural China? Would removal of restrictions on factor markets (credit, labor, and land) produce further increases in agricultural output? How has the household responsibility system affected income distribution, and what are the principal determinants of the variation in incomes across rural households in China?

Answering these questions requires detailed household-level information, data that are rare for China. This project collected data from about 1,000 households in 30 villages in Hebei and Liaoning Provinces in the summer of 1995.

When the project is completed, the results are expected to shed light on two broad policy questions. First, what would be the effect on productivity of further liberalization of the rural economy (ending restrictions on hiring of labor, private provision of credit, and buying, selling, and renting of land)? And second, what avenues are available for further reducing poverty in rural China? Preliminary results have shown that clear property rights lead to more investments in land improvements.

Responsibility: Policy Research Department, Poverty and Human Resources Division--Paul Glewwe (pglewwe@worldbank.org). With Loren Brandt, University of Toronto; Scott Rozelle, Stanford University; and the Research Center in Rural Economy, China. The National Academy of Sciences, United States, and the International Development Research Centre, Canada, are providing funding for the research.

Completion date: December 1997.

Report:

Rozelle, Scott, Li Guo, and Loren Brandt. "Land Tenure, Property Rights, and Productivity in China's Agricultural Sector."

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