LAW, LAND RIGHTS, AND REVENUE Prof. Susan Whiting Political Science - - PowerPoint PPT Presentation

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LAW, LAND RIGHTS, AND REVENUE

• Prof. Susan Whiting

Political Science University of Washington

Law, Land Rights, and Revenue

• 1. Generation and extraction of revenue from land
• 2. Role of law and legal institutions
• Documents
• Case studies
• Survey data
• 3. Theoretical reflections
• Political economy of institutions
• 4. Conclusions: Authoritarian embrace of law

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Land: major source of fiscal revenue

• Total revenue from land conveyance
• Mainly converting land from agriculture to real estate, industrial uses
• 2010 nearly 3 trillion rmb (> US $400 billion)
• 2001 nearly 130 billion rmb (> US $15 billion)
• Liu Shouying, Deputy Director,

Department of Rural Economy State Council Development Research Center

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Land: major source of fiscal revenue

• Especially important revenue source for local governments

(cities and counties)

• Outside the formal budget (“extra-budgetary funds”)
• Rival the size of the formal budget
• Kung and Chen 2013

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What is the role of the legal system in this process of revenue extraction?

• Legal system facilitates revenue extraction from

rural sector via

• Constitution and laws
• Role of courts
• Dispute resolution process

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Role of the legal system

• Legal system channels

conflict away from the local government

• Transforms conflict over

state land takings into disputes among villagers themselves

• Makes rural land rights

less secure

• Contrary to existing lit.
• Limits legal recourse
• Contrary to existing lit.

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Constitution and nature of land rights

• 1954 Constitution
• “The state protects the right of

peasants to own land.”

• 1956 socialist transformation
• “All privately owned land… is to be

turned over as collective property.”

• Today’s Constitution
• Distinguishes urban and rural land
• Rural land is collectively owned by

villages  rights enshrined by Constitution are not private

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Land law and nature of land rights

• Rural households are prohibited from using arable land

for non-agricultural purposes (RLCL Article 8).

• Only the state may convert rural land to more profitable

urban uses (LML Article 2)

• Land conversions take place at below-market value

(LML Article 47)

• Compensation for agricultural use value only
• Paid to members of collectives

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Land law and nature of land rights reflect urban bias

• Legacy of “socialist transformation” in China
• “Collective ownership of rural land…

serves—in the market economy—as the legal basis on which local government monopolists extract ‘power rents’ from land conversion” (Yu Jianrong)

• State officials extract rents from rural sector through non-

market mechanisms (Robert Bates)

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Legal system channels conflict

• Households can challenge the distribution of

compensation within the collective but not the amount of compensation itself (SPC Interpretation 2005)

• Most land takings compensation cases are civil cases,

reflecting disputes within the village

• Administrative cases challenging the legality of taking itself
• Difficult to file
• Seldom accepted by court

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State actions cause collective conflict Case study of land taking for 3 factories

• The goal for each

household was to receive as much compensation as possible.

• “Every time a meeting

was held, there were two groups in conflict, making it difficult to resolve.” (Village leader)

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State actions cause collective conflict Case study of land taking for 3 factories

• Source of conflict 1:
• How should

compensation be distributed within the village?

• Pay only affected

households; no redistribution of remaining arable land, or

• Pay all village members;

redistribute remaining arable land

• Adopted this approach
• Made land rights less

secure

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State actions cause collective conflict Case study of land taking for 3 factories

• Source of conflict 2:
• Who counts as a member
• f the village?
• Who has household

registration in the village?

• Who has lived in the village

the longest?

• Who has paid their taxes?
• Married sons but not

married-out daughters?

• Adopted most restrictive

criteria

• Challenged by villager in

court (unsuccessfully)

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State actions cause collective conflict Case study of land taking for 3 factories

• What is NOT

challenged:

• Legality of taking itself
• Government share of

total land conveyance fees paid by factories

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Locus of conflict over land takings compensation (illustrative)

Locus of conflict

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Household-level survey of land disputes

• Survey of 1897 households in 36 villages in 3 provinces
• With RCCC and Changdong Zhang
• Quantitative analysis
• With Xiao Ma

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Household-level survey of land disputes

• 11% (208) reported land disputes (n=1897)
• 41% land-takings compensation (civil)
• 24% allocation of agricultural land
• 35% boundaries and related issues with neighbors
• Dispute resolution
• 70% (145) took action
• 30% (63) “lumped” it
• “other party too powerful”

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Land-taking disputes more likely where land is most valuable (close to county seat)

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Land-taking disputes more likely where land is most valuable (close to county seat)

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−0.1 −0.05 0.05 0.1 −0.1 −0.05 0.05 0.1

Change in Probabilities of Having State Land−Taking Disputes

Number of Households=1897

Change in probabilities with 90% confidence inter vals County Seat (as to not in county seat) Income (1 sd above mean) Reliance on Agriculture (min to max) Landsize (1 sd above mean) Complete Middle School (as to primary school) Family Connection(as to no connection) Social Connection (as to no connection) Party Membership

Land-takings disputes make additional disputes over allocation of remaining agricultural land in village more likely

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When reallocations follow takings, household rights are less secure

Land-takings disputes make additional disputes

• ver allocation of remaining agricultural land in

village more likely

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−0.05 0.05 0.1 0.15 0.2 −0.1 −0.05 0.05 0.1 0.15 0.2 −0.1

Change in Probabilities of Having Collective Land Distribution Disputes

Number of Households=1897

Household Level County Seat (as to not in county seat) Had State Dispute (household or village level) Income (1 sd above mean) Reliance on Agriculture (min to max) Landsize (1 sd above mean) Complete Middle School (as to primary school) Family Connection(as to no connection) Social Connection (as to no connection) Party Membership

−0.05 0.05 0.1 0.15 0.2 −0.1 −0.05 0.05 0.1 0.15 0.2 −0.1

Number of Households=1897

Village Level

When reallocations follow takings, household rights are less secure

Land-takings disputes make boundary disputes among neighbors more likely

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Disputes are channeled away from state

Land-takings disputes make boundary disputes among neighbors more likely

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−0.05 0.05 0.1 −0.05 0.05 0.1

Change in Probabilities of Having Neighborhood Land Disputes

Number of Households=1897

Household Level County Seat (as to not in county seat) Had State Dispute (household or village level) Had Collective Dispute (household or village level) Income (1 sd above mean) Reliance on Agriculture (min to max) Landsize (1 sd above mean) Complete Middle School (as to primary school) Family Connection(as to no connection) Social Connection (as to no connection) Party Membership

−0.05 0.05 0.1 −0.05 0.05 0.1

Number of Households=1897

Village Level

Disputes are channeled away from state

Theoretical reflections

• Political economy of institutions
• What underpins a state’s ability to generate (and extract) revenue?
• North
• Legal system that enforces private property rights is prerequisite for

economic growth

• Acemoglu & Robinson
• Inclusive economic institutions drive sustained economic growth
• Secure, private property
• Unbiased system of law
• Besley
• Institutions that assign factors to most productive uses are key to prosperity
• Acemoglu & Robinson
• Extractive economic institutions—opposite properties

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Theoretical reflections

• China’s place in this literature
• “part of broader pattern of prosperity (Acemoglu and Robinson)”
• England, US, Taiwan, Korea, China
• Tendency to read institutions from growth?
• “law offers protection from land grabs (World Bank blog)”
• “increasing security of individuals’ land-use rights (Deininger and Jin)”

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Theoretical reflections

• China’s place in this literature
• China—extractive economic institutions (Acemoglu and Robinson)
• Growth can occur “when elites directly allocate resources to high

productivity activities that they themselves control”

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Theoretical reflections

• China’s place in this literature
• What is the role for law?
• English enclosures (Acemoglu and Robinson)
• Claim: Inclusive law precedes rather than follows economic growth
• Contrast Thompson, Thirsk
• Chinese land takings
• My claim: Inclusive law may follow rather than precede economic growth
• English enclosures lack property of inclusive law

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SKIP Theoretical reflections

• Micro-level study of land disputes in China
• Distinguish
• Nature of property rights
• Legally defined property may be private or communal
• Role of legal system
• Legitimates a given system of property
• Channels conflict over that system
• Factor allocation
• Multiple mechanisms to assign factors to higher-value uses
• Administrative allocation
• Second-best institution
• Generate politically important revenue/rents

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Theoretical reflections

• Chinese case
• Tease out relationships among elements of “rights hypothesis” (North)
• Nature of rural land rights

 Constitution, law define state and collective rights—not private

• Role of legal system

 Legitimates state and collective rights through law  Allows contestation but channels conflict away from state

• Factor allocation

 Administrative mechanisms shift land to higher-value uses

• Generate politically important rents

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Conclusion

• Why authoritarian embrace of law and legal institutions?
• From perspective of land law
• Enshrine state and collective rights in law
• Legitimize one form of generating and extracting revenue
• Channel conflict over extraction away from the state.

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Conclusion

• Is authoritarian embrace of law a double-edged sword?
• New Citizens Movement

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