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Property Rights and Fertilizing Practices in Rural China

Economists have long assigned property rights a central role in economic development. In particular, secure property rights, which allegedly exist only under a regime of private ownership, are believed crucial for inducing wealth-maximizing behavior because rational individuals will not invest if the fruits of their investment are not adequately protected (Alchian and Demsetz, 1972; Demsetz, 1967). Applying this premise to agriculture, one would expect that without secure property rights, farmers would not effectively use land in a manner compatible with long-term societal interest (Feder and Feeny, 1993; Johnson, 1972). The nature of property rights associated with the land tenure system in postreform China arguably offers an example of how an incomplete regime of private ownership can undermine economic efficiency. China’s break with collective farming has been credited with driving increased agricultural productivity and output during the initial reform period (circa 1979-1984). Ironically, the subsequent slowdown in