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2017-01-21 | Peer Reviewed

Property rights reform, grassroots democracy and investment incentive

Zhang, Hong, Lian Zhou, Jintao Xu and Jinyong Zhao. 2016. “Property rights reform, grassroots democracy and investment incentive.” China Economic Quarterly (in Chinese). 15:3: 845-868.
Download reference Doi:10.13821/j.cnki.ceq.2016.02.01

Since 2006, China began a property reform on rural forest land, which is called "the second land reform" after the implementation of China's rural household contract responsibility system. Using a unique household survey data, we analyze the impact of grassroots democratic decision-making on investment incentives of the property right reform on forest land. We find that the property rights reform promotes farmers to raise about 19% of labor input on the forest land only in villages with a democratic decision-making process, while the property rights reform without a democratic decision-making process does not generate any significant incentive for investment. We also explore the channel of that impact and find that the democratic decision-making process can improve investment by enhancing villagers' confidence in their property rights and by empowering them through their involvement in the decision-making process to know their benefits.