Property rights, tenure security and forest investment incentives: evidence from China's Collective Forest Tenure Reform

Abstract

This paper assesses how tenure reform in China's collective forest sector affects Chinese farmer households' perception of tenure security and propensity to invest in their forestland. A large database consisting of information from 3,180 households in eight provinces from south to north is used to explore factors correlated with more strongly perceived tenure security and determinants of forest-related investment. The study adds to the limited research testing whether there is endogenous causality between investment and tenure security in forestland, and finds that investment was not undertaken to enhance tenure security. In addition, the data allow for differentiation between perceived tenure security and contracted use and transferability rights. Overall, stronger contracted rights were found to affect investment. China's forest tenure reform -where individual households can manage forestland, empowered by legal certification and stronger contract rights -has thus enhanced tenure security and encouraged forest investment.

Does Property Rights Integrity Improve Tenure Security? Evidence from China’s Forest Reform

“…Specifically, Holden et al [17] distinguished seven disaggregate rights in a property rights bundle: the right to convert forestland to cropland, the right to change forest type, the right to decide tree species, the right to intercrop trees and agricultural crops, the right to abandon forest, the right to transfer the plot to other villagers, and the right to transfer the plot to outsiders. Yi et al [7] added mortgage rights with and without certificates to the bundle. We distinguish similar rights in our work, and further take the "right to harvest timber" into consideration.…”

“…As shown in that figure, the collective forest reforms have provided farmers with a bundle of land property rights (including use rights, transfer rights, and mortgage rights, see Step 1 in Figure 1). Existing studies of the relationship between the new round of collective forest tenure reform and forestland tenure security mainly focus on the direct impact on farmers' perceived forestland tenure security (Step 2) [7,17]. However, these studies do not distinguish between different threats of tenure security, i.e., the underlying mechanisms (Step 3).…”

“…For example, they can select tree species, interchange different forest types (among timber forest, economic forest, and fuel wood forest), and so on. Through this measure, farmers, rather than the village committee, became the main decision-makers of collective forestland [7]. (2) Guaranteeing the usufruct benefits of forestry managers by reducing wood and bamboo tax and fees, relaxing the harvesting regulation gradually, and reforming the collection, management, and use of forest cultivation fund.…”

“…On average, 10% of the household members are engaged in off-farm jobs. Off-farm labor can be seen as an opportunity cost for forest management [7]. The more laborers working off-farm, the higher the possibility that the forest will be left idle.…”

“…The decentralization of forest management in some developing countries, for example, Vietnam, Ecuador, and China, has allowed similar research to be extended to the area of forest tenure. A number of studies have provided empirical evidence that forest tenure security stimulates household incentives to invest in forestland [5][6][7][8][9], transfers of forestland to more efficient uses through land markets [10,11], and rural household incomes [12][13][14]. Regarding the ecosystem, forest tenure security has been found to increase forestation [15,16].…”