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Informality, informal institutions, and uneven land reform in China

ABSTRACT The concept of informal institutions is broadened in this paper to refer to a mode of institutions that is ambiguous, temporary or uncodified. More importantly, it can be a state product to further state interests because it can be (1) a form of experiment of institutional innovation; (2) associated with preference for ex post bargaining; and (3) an instrument for state power. Uneven land reform in China is studied to analyse the different roles of informal institutions in the economic reform. It is found that, first, urban land reform proceeds in a more formal way; and second, informal institutions are employed in urban land reform as transitional institutions towards more efficient formal institutions while they are employed in rural land reform as an instrument to sustain state legitimacy and power. Two conditions for the above differences are identified: (1) Rural governance, collective landownership and agricultural production were fully integrated in the planned economy. Privatisation that would dismantle old institutions of rural governance and build new ones causes concerns about state legitimacy and authority. (2) Rural society is more organised by the clan system than urban society and, hence, ex post bargaining is more likely to be preferred in the countryside than in the city.