‘other’ category are more pronounced at greater distances to Chengdu. At the same time, reform-induced increases of non-residential construction land are much larger as one moves closer to the city center and quickly disappear as one moves away from it.

# **4.3 Land market operation and enterprise start-ups**

Although official records on actual land use are preferable to evidence on market-based transactions that may, for a range of reasons, not be formalized, data on transactions allow us to cross-check findings based on land use and ascertain if such changes are driven by market-based transactions. Results from doing so (table 5) suggest that, indeed, a significant part of the land use change observed earlier can be attributed to land market activity, in three respects. First, we note a significant increase in market-mediated transfers of construction land, albeit from a very low level, with point estimate of 1.8 percentage points suggesting that reform helped to almost double the pre-existing level of such transfers. The contrast with insignificantly negative point estimates in placebo regressions (panel B) suggests that estimates are unlikely to pick up pre-existing trends in Chengdu prefecture. Second, we find evidence of a significant reform-induced increase in formal transfers of agricultural land, with a point estimate of 7.1% or 4.9% with and without government-supported transfers, respectively, compared to a pre-reform level of 3.5% or 2.6%.<sup>15</sup> Finally, we find a significant reform effect for shorter-term land transfers in informal markets with an estimated increase in the incidence of land market activity of 6.8%, compared to a pre-reform mean of 21%, contrasting with an insignificant pre-reform trend according to the placebo (panel B). We can also run regressions for the share of households participating in land markets. Results from doing so in table 5, col. 2-4 suggest that reform led to a significant increase in the share of households who either rented in or out, with point estimates of 1.0% and 0.8%, respectively, but did not affect mean shares of land transferred.<sup>16</sup> There is no evidence of significant pre-reform trends if other variables are controlled for, consistent with the notion of a reform-induced increase in the incidence of land market transactions.

Although suggestive of reform-induced increases in land market activity, the above results provide little detail on the extent to which reforms in land markets interacted with labor market outcomes. In the absence of household level information on time allocation or wages received, we use village-level data on enterprise start-ups to test for such effects. Results (table 6 col. 1 and 2) point towards significant reform-induced increases in the likelihood of overall enterprise start-ups, with point estimates of 2.7% and 3.1% with and without spatial fixed effects that are large compared to a pre-reform mean of 4.4% and contrast to insignificant pre-reform trends. For villages where new enterprise formation was observed, estimates of the

> 15The placebo test suggests that, while we cannot reject the hypothesis of parallel trends in a linear model (table 1), the growth rate of formal land market transactions may already have been higher for villages inside as compared to outside the Chengdu prefecture boundary, before the reforms. 16 While the fact that figures are based on recall by village leaders implies that all of effects reported in table 5 should be treated with greater caution than the others that are based on information taken from administrative records, we think they are still of interest and worth reporting.

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