Abstract：We established a two-sector household occupational choice model to theoretically explore how land titling reform impacts rural labor force allocation. The model suggested that the enhancement in rural land property right induced households to allocate more labor in the agricultural sector through two channels: agricultural productivity improvement and land costs reduction, both of which increased rural income. Furthermore, we employed China Labor Dynamics Survey (CLDS) panel database, and exploited the new round of rural land titling reform in China as a quasi-natural experiment to empirically study how the enhancement of rural land property rights impacted labor resource allocation. Employing a difference-in-differences model, the empirical analysis examined the causal relationship and mechanisms between land property rights stability and the allocation of labor resources among rural households. The empirical results were consistent with the theoretical conclusion, indicating that enhancing the stability of land property rights increased the proportion of labor resources allocated to agriculture. This finding remained robust under propensity score matching difference-in-differences method, instrumental variable tests and placebo tests.
The underlying mechanism was that the improvement of land property rights stability reduced transaction risks and costs, incentivizing agricultural inputs by rural households. This directly affected the allocation of land and capital, with the former promoting land consolidation and generating economies of land scale, and the latter facilitating the development of agricultural socialized services and forming economics of service scale. These factors collectively enhanced land and labor productivity, ultimately influencing the allocation of labor resources. The instability of property rights led to lower production efficiency, while the stabilization of rural land property rights could “pull back” high agricultural productivity households that were previously misallocated to non-agricultural sectors. Thus, this study provided a revision to the classical institutional economics theory. This phenomenon represented the true mechanism and significance of rural property rights reform for optimizing resource allocation from the perspective of China’s modernization.
Heterogeneity analysis revealed that the impact of land property rights stability on household labor resource allocation varied across different family sizes and village characteristics. Specifically, stabilization of rural land property rights significantly increased the proportion of agricultural labor allocation for family with larger members, but had no significant impact on small households. The effect was not significant for villages with traditional food crops such as rice and wheat as the main products, but significant for villages with other non-traditional food crops such as corn and potatoes as the main products.
Unlike previous studies which held the belief that agriculture was always impoverished and that the productivity of the agricultural sector was inherently lagging behind that of the non-agricultural sector, and the optimal allocation of factors was achieved as long as agricultural labor was transferred to the non-agricultural sector, we proposed that the reason for China’s low agricultural productivity and agricultural income was its incomplete land property system, which led to the mismatch of labor with originally high agricultural productivity allocated to the non-agricultural sector. The land titling reform increased agricultural productivity and agricultural income. As a result, the labor force was “correctly” pulled back to agriculture sector, which achieved optimized allocation of labor resources. This process was a manifestation of modernization with Chinese characteristic.
Based on findings above, we proposed policy implication to improve the rural factor market development, to introduce relevant support policies for large-scale agricultural development, and to focus on guiding the rational, smooth and orderly flow of labor resource. This paper provided a perspective from China’s rural property rights system reform to study how to achieve “Common prosperity” in the New Development Stage.
