Impact of land tenure policy on agricultural investments in China: Evidence from a panel data study

The goal of this paper is to examine the impact of changes in China's rural land policy on agricultural investments. Dramatic changes occurred in China's rural land policies after 2000, including the extension of rural land contractual period, restriction of land reallocation 'among villages and villagers groups, elimination of agricultural taxes for responsibility land, and rapid development of rural land rental markets. These changes have given farmers more secure tenure on collectively controlled responsibility land and have strengthened farmers' income rights for responsibility lands, incentivizing them to increase their investments on responsibility lands. A panel data method was used to quantitatively investigate the impact of land policy changes on agricultural investment. We considered the application of organic fertilizer as an indicator for long-term agricultural investment, and compared the use of organic fertilizer between private plots and responsibility lands operated by the same household. The results showed that the difference in organic fertilizer use between private plots and responsibility land for the same household has become smaller from 2000 to 2008. Our findings suggest that recent changes in rural land policies have provided farmers incentives to increase land quality investment on their responsibility lands.