The RLCL includes a number of measures that aim to significantly change the cost of acquiring land. It does so by increasing the security of individual land use rights and enhancing individuals’ ability to lodge appeals against violation of such rights. This is achieved by requiring compensation for individual loss of land and, more importantly, by tightly circumscribes the conditions under which administrative land reallocation -traditionally leaders’ preferred avenue for eminent domain land acquisition- is feasible.

Although this will not alter the benefits from land conversion, we expect the RLCL to reduce the amount of land acquired under eminent domain in ways that are no longer legal and the compensation paid for land acquired legally. Our aim is to empirically assess whether -and if yes under what circumstances- this was the case. To do so, we use a unique panel data set of almost 800 villages plus 8,000 randomly selected households for the period before and after the coming into force of the RLCL. Our indicators for enforcement of private property rights are (i) conduct of “illegal” reallocations and (ii) compensation received by those who had part or all of their land expropriated. As both of these are available from before and after passage of the law, we can assess whether the RLCL alone or in combination with other factors, e.g. distribution of land use certificates, helped to improve tenure security.

We find that, even within the short time horizon considered, legal reform had a significant and quantitatively important impact on increasing the security of property rights. Instrumental variable estimates point towards strong complementarity between democratic elections and effectiveness of legal change in the sense that legal reform had a positive impact only where the village leadership was elected. This suggests that, for legal reform to be effective, means to hold the state accountable are needed, an interpretation that is supported by the fact that village leaders’ knowledge of the law had an independent impact on reducing the probability of illegal reallocation. At the same time, availability of land use certificates did not significantly reduce the risk of an unauthorized land reallocation, suggesting that such certificates will only be useful within an appropriate institutional framework.

Results for levels of compensation in case of expropriation, an issue where procedures are better defined and involvement by a range of outsiders makes it more difficult to circumvent the rules, support the notion of a positive reform impact mediated through elections. Payments for land to be used by the public sector, which had been significantly below that for land to be used by private investors before the reform, had come to equal the latter thereafter. Compensation was also higher in locations where more households had land use certificates. This suggests that legal reform to strengthen property rights can have significant impact which will be further enhanced by (i) mechanisms to hold leaders accountable, (ii) dissemination of the content of the law, and (iii) distribution of land use certificates if they can be enforced.

The remainder of the paper is organized as follows: Section two places the topic in context by discussing the characteristics of the rural land administration system in China and by highlighting resulting analytical 2