Land Security and Mobility Frictions
Developing countries are characterized by frictions that impede the mobility of workers across occupations and space. We disentangle the role of insecure property rights from other labor mobility frictions for the reallocation of labor from agriculture to non-agriculture and from rural to urban areas. We combine rich household and individual-level panel data from China and an equilibrium quantitative framework that features the sorting of workers across locations and occupations. We explicitly model the farming household and the endogenous decisions of who operates the family farm and who potentially migrates, capturing an additional channel of selection within the household. We find that land insecurity has substantial negative effects on agricultural productivity and structural change, raising the share of households operating farms by almost 30 percentage points and depressing agricultural productivity by more than 10 percent. Quantitatively, land insecurity is as important as all other labor mobility frictions. We measure a sharp reduction in overall labor mobility barriers over 2004-2018 in the Chinese economy, all of which can be accounted for by improved land security, consistent with reforms covering rural land in China during the period.
We thank Lin Ma, Kjetil Storesletten, Xiaodong Zhu, and seminar participants at Academia Sinica, Boston University, the Midwest Macro Meeting at Michigan State University, the North American Meeting of the Econometric Society in Montreal, Peking University, Queen's University, the Society of Economic Dynamics in Minneapolis, Texas A&M University, Trinity College Dublin, University of Nottingham. Adamopoulos, Brandt, and Chen gratefully acknowledge the support from the Social Sciences and Humanities Research Council of Canada. Brandt thanks the support from the Noranda Chair for International Trade and Economics. Restuccia gratefully acknowledges the support from the Canada Research Chairs program and the Bank of Canada Fellowship program. Funding from the Research Support Board at the World Bank supported data access and collection. The views expressed herein are not necessarily those of the Bank of Canada and are the authors alone. All errors are our own. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.