Land titling, human capital misallocation, and agricultural productivity in China

Abstract

Previous studies quantifying the relationship between land titles and agricultural productivity have not explored the role of human capital reallocation. This paper enhances existing literature by examining the effects of land titling on the reallocation of labor with heterogenous human capital endowments between agricultural and non-agricultural sectors. In reference to China's county-by-county rollout of the land titling program, this paper applies a difference-in-differences (DID) framework and finds that farmers with higher human capital are more likely to migrate out of villages following the completion of the titling program, which in turn causes a “brain drain” from the agricultural sector. There is a subsequent decrease in agricultural productivity and output. This productivity loss has not been thoroughly discussed in previous studies and nor considered in the policy making process. Our results indicate that future land reforms should consider the impact of land titling programs on the reallocation of human capital across sectors.