Land ownership and productivity in early twentieth‐century China: the role of incentives

Purpose – This paper seeks to use data from China between 1929 and 1933 and provides new empirical evidence to the debate over the impact of land ownership and land‐renting systems on agricultural productivity. Design/methodology/approach – The authors estimate the OLS regression to determine the relationship between land ownership (and land‐renting systems) and farmers' productivity. Findings – The findings suggest that land ownership was not a major factor in determining farmers' productivity; instead, agricultural infrastructures and institutions had the greatest influence on agricultural productivity. Furthermore, different renting systems generated different impacts on farmers' behavior: sharecropping reduced farmers' productivity while fixed rental contracts had no significant impact on farmers' productivity. Practical implications – This paper has two important policy implications for developing countries. First, agricultural policy that aims to raise agricultural productivity should focus more on improving agricultural infrastructures and institutions than on blindly supporting land privatization. Second, policymakers should promote fixed rental contracts over share contracts because fixed rental contracts were shown to have a smaller adverse impact on farmers' incentives. Originality/value – This paper uses data from China and provides new evidence on the relative importance of land ownership and agricultural infrastructures/institutions in agricultural production. China is a country with a long agricultural history and a long‐standing well‐developed tenancy system. The case of China may therefore provide answers to policymakers in other developing countries.