The Welfare Effects of Land Reform: Lessons from Yunnan, China

Abstract

Land reform has been perceived to be a major avenue for poverty reduction, amid controversies regarding the impacts of land reform in developing economies. This paper demonstrates how China’s land reform in the 1950s succeeded in reducing hunger and poverty. To be more specific, our paper constructs a theoretical model, deriving hypotheses with respect to the welfare effects of land reform in general. The hypotheses are then empirically tested using a unique data set from China. Our identification strategy of combining propensity score matching (PSM) with Differences-in-Differences (DID) estimations ensures the reliability of causal inferences and analytical results. The paper concludes that China’s land reform in the 1950s significantly improved the welfare of peasants in terms of subsistence living while its effect on non-subsistence welfare was insignificant.

Keywords:

• Land reform
• welfare effects
• subsistence living
• China

JEL CLASSIFICATION CODES:

• Q15
• C21
• D31
• N55

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

The data and STATA do-files used for the analysis are available from the authors upon request.

Notes

1 This paper focuses on the first land reform. The second land reform of China happened in 1958 involved land collectivization, commonly known as the movement to the commune system. The third that began in the late 1970s involved land redistribution from commune to individual households, commonly knowns as the movement to the household production responsibility system.

2 This village shares many commonalities that characterize a typical village in China, as discussed in more details in Section 5.1 below.

3 Following Gollin, Parente, and Rogerson (2002) who include labor as the only input in their production function, we include land as the only input in model (1) because we are interested in the welfare impacts of land redistribution. In addition, labor and capital inputs hardly changed during the short period of our study.

4 As recorded in Compilation of Social and Historical Information on Yunnan Minorities IV, in 1955 the rice price was 0.12 yuan/kg. The subsistence income per person for the treatment group can be estimated as 53.8 yuan (=0.12 × 1.5 × 299.3) and for the control group as 78.3 yuan (=0.12 × 1.5 × 434.8). Thus, the total per capita income (non-farming monetary income + subsistence income) is 65 yuan (53.3/4.8 + 53.8) for the treatment group and 86 yuan (43.4/5.4 + 78.3) for the control group.

Additional information

Funding

This work was supported by the Natural Science Foundation of China [grant number NSFC 71833003].