Insecure Land Tenure, Social Protection, and Resource Misallocation: Evidence from China's Agricultural Sector

Smallholder farmers usually face insecure land rights and limited social protection, so farmland serves as an important safety net against income shocks. The safety net value of farmland makes the loss of land rights extra costly and strengthens the well-documented incentive to self-cultivate as an informal way of protecting land rights. This article provides theoretical and empirical evidence of allocative effects of the nonproductive value of farmland. It further employs survey data from China in sector-level simulations to show that eliminating the nonproductive value would significantly increase the consolidation of land, raise smallholder income, and expand labor supply away from smallholders' own land.</p>