Rural to urban land conversion in China — How large is the over-conversion and what are its welfare implications?

R. Tan, F. Qu, N.B.M. Heerink, E. Mettepenningen

Research output: Contribution to journalArticleAcademicpeer-review

48 Citations (Scopus)

Abstract

The current system of converting farmland to urban land use in China can be characterized as a hybrid system that combines government controls with market-based transfers. In this paper we argue that this hybrid governance structure causes an over-conversion of farmland from the rural to the urban sector, as compared to a competitivemarket situation, and awelfare reallocation that discriminates against farmland owners.We develop a partial equilibriummodel that can be used to examine the impact of the current hybrid governance structure on the over-conversion of farmland and to analyze the welfare changes for different groups of actors and the resulting net social welfare loss. Using a dataset with detailed information on farmland acquisitions and urban land transactions in Yingtan City in Jiangxi Province, we illustrate how this framework can be applied. Our results indicate an over-conversion of 33.5% of the total converted farmland in this city between 1999 and 2003. The welfare of farmland owners affected by the conversion decreased by 1.38 billion RMB, while the net social welfare loss equaled more than 270 million RMB during the same period. The local government obtained 380 million RMB of revenues by reselling farmland as urban land through competitive conveyance mechanisms between 2002 and 2005,while themanufacturing sector gained an estimated 280 million RMB from buying land use rights at relatively low prices. We conclude that the current policy of increasing urban land conveyance through competitive mechanisms does not address two major underlying causes of over-conversion, and that protection of farmlandwould be better served by replacing the current hybrid rural to urban land market structure by a competitive land market.
Original languageEnglish
Pages (from-to)474-484
JournalChina Economic Review
Volume22
Issue number4
DOIs
Publication statusPublished - 2011

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Welfare implications
Farmland
China
Land use
Governance structure
Social welfare
Owners
Welfare loss
Land market
Revenue
Local government
Reallocation
Market structure
Government
Hybrid systems

Keywords

  • policy
  • expansion

Cite this

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title = "Rural to urban land conversion in China — How large is the over-conversion and what are its welfare implications?",
abstract = "The current system of converting farmland to urban land use in China can be characterized as a hybrid system that combines government controls with market-based transfers. In this paper we argue that this hybrid governance structure causes an over-conversion of farmland from the rural to the urban sector, as compared to a competitivemarket situation, and awelfare reallocation that discriminates against farmland owners.We develop a partial equilibriummodel that can be used to examine the impact of the current hybrid governance structure on the over-conversion of farmland and to analyze the welfare changes for different groups of actors and the resulting net social welfare loss. Using a dataset with detailed information on farmland acquisitions and urban land transactions in Yingtan City in Jiangxi Province, we illustrate how this framework can be applied. Our results indicate an over-conversion of 33.5{\%} of the total converted farmland in this city between 1999 and 2003. The welfare of farmland owners affected by the conversion decreased by 1.38 billion RMB, while the net social welfare loss equaled more than 270 million RMB during the same period. The local government obtained 380 million RMB of revenues by reselling farmland as urban land through competitive conveyance mechanisms between 2002 and 2005,while themanufacturing sector gained an estimated 280 million RMB from buying land use rights at relatively low prices. We conclude that the current policy of increasing urban land conveyance through competitive mechanisms does not address two major underlying causes of over-conversion, and that protection of farmlandwould be better served by replacing the current hybrid rural to urban land market structure by a competitive land market.",
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Rural to urban land conversion in China — How large is the over-conversion and what are its welfare implications? / Tan, R.; Qu, F.; Heerink, N.B.M.; Mettepenningen, E.

In: China Economic Review, Vol. 22, No. 4, 2011, p. 474-484.

Research output: Contribution to journalArticleAcademicpeer-review

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AU - Qu, F.

AU - Heerink, N.B.M.

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N2 - The current system of converting farmland to urban land use in China can be characterized as a hybrid system that combines government controls with market-based transfers. In this paper we argue that this hybrid governance structure causes an over-conversion of farmland from the rural to the urban sector, as compared to a competitivemarket situation, and awelfare reallocation that discriminates against farmland owners.We develop a partial equilibriummodel that can be used to examine the impact of the current hybrid governance structure on the over-conversion of farmland and to analyze the welfare changes for different groups of actors and the resulting net social welfare loss. Using a dataset with detailed information on farmland acquisitions and urban land transactions in Yingtan City in Jiangxi Province, we illustrate how this framework can be applied. Our results indicate an over-conversion of 33.5% of the total converted farmland in this city between 1999 and 2003. The welfare of farmland owners affected by the conversion decreased by 1.38 billion RMB, while the net social welfare loss equaled more than 270 million RMB during the same period. The local government obtained 380 million RMB of revenues by reselling farmland as urban land through competitive conveyance mechanisms between 2002 and 2005,while themanufacturing sector gained an estimated 280 million RMB from buying land use rights at relatively low prices. We conclude that the current policy of increasing urban land conveyance through competitive mechanisms does not address two major underlying causes of over-conversion, and that protection of farmlandwould be better served by replacing the current hybrid rural to urban land market structure by a competitive land market.

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