China's Incomplete Property Rights and their Effects

Abstract

Over the last thirty years mainland China has experienced world transforming growth and lifted hundreds of millions out of poverty. Originally most of the growth occurred in rural areas as farmers were given control over the management of their plots. Overall inequality throughout China decreased as rural incomes rose due to higher agricultural outputs. However by the mid-nineteen eighties the government shifted its reform focus towards the urban areas, particularly the coastal port cities. Rural reform slowed considerably and the central government issued stopgap measures to keep rural land usage contracts expiring without introducing any significant market reforms. The Chinese government's refusal to secure rural property rights has a role in reducing agricultural production growth due to less financing and investment. This could also have a long run effect of reducing rural to urban migration, which slows urban-rural in equality predicted reductions. Using international panel data I measure the importance of property rights and institutions on agricultural productivity. I also attempt see how increased agricultural productivity affects migration and the urban rural wage gap.