Contents lists available at ScienceDirect Land Use Policy journal homepage: www.elsevier.com/locate/landusepol Is deregulation of forest land use rights transactions associated with economic well-being and labor allocation of farm households? Empirical evidence in China Yan-Zhen Hong a , Hung-Hao Chang b, ⁎ , Yong-Wu Dai c a School of Economics, Fujian Agricultural and Forestry University, China b Department of Agricultural Economics, National Taiwan University, No1, Roosevelt Rd, Sec 4, Taipei 10617, Taiwan c School of Management, Fujian Agricultural and Forestry University, China ARTICLE INFO JEL classification: Q15 J22 Keywords: Forestland use rights transaction decision (FTD) Economic well-being Labor allocation China ABSTRACT Economic development literature has documented the importance of property rights of farmland for household well-being. Despite this well-supported consensus, limited empirical evidence has been provided for forestland. This study fills the gap in existing literature by identifying the determinants of forestland use rights transaction decision (FTD)–that is the decision of households to rent in or rent out the forestland. This paper also empirically assesses the association between the FTD and the economic well-being and labor allocation of households in China. Using unique survey data of 2228 households in 7 provinces of China, a multiple-choice treatment effect model was estimated to cope with potential endogeneity bias. Results indicate that forestland size, forestland fragmentation, and age and education of the household head, as well as region heterogeneity, are associated with the decision to participate in FTD. Households renting forestland from others have higher household consumption and savings than those households without forestland transaction, and households renting out forestland also have a higher level of savings. The improvement in household economic well-being due to FTD is possibly because of an efficient reallocation of family and hired labor as well as a higher likelihood to receive policy financial loans on forest production. 1. Introduction More than 25% of the world’s population relies on forest resources for their livelihood (FAO, 2015). Among others, a well-defined and enforceable property right on forestland has been recognized as the cornerstone of efficient forest management (e.g., Goldstein and Christopher, 2008; De Janvry et al., 2014; Takahashi and Otsuka, 2016). In some countries, such as Vietnam, Mexico, and China, land rights are established through the contingent use of the land rather than land titles (Linde-Rahr, 2008; De Janvry et al., 2015). In China, income from forest products contributes to 17% of the average total annual household income (State Forestry Administration, hereinafter SFA, 2015). Moreover, 60% of forestland was titled to collective ownership, and their use right was collectively owned and not allowed to be cir- culated among farmers until the recent round of Collective Forest Te- nure Reform (CFTR) in 2003. Since 2003, with a focus on increasing the efficiency of forestland use, forestland circulation programs that allow forestland use rights transactions (FURT) have been widely sponsored by the government for two reasons. First, during the CFTR, forestland is distributed to households according to the principle of equity, with the result that each household holds a small size of the fragmented for- estland. It has been documented that land productivity is negatively associated with land size, so the fragmentation of forestland might re- duce productivity of forestry production (Hatcher et al., 2013; Qin and Xu, 2013; Sklenicka, 2016). Second, as many farmers are becoming migrant workers, re- allocating the idle forestland is necessary for specialized management of these resources. Copious empirical evidence has documented the positive effects of land transactions on farm production and household welfare. For instance, Deininger et al. (2009) used a large panel dataset for 20 years from India, together with a climatic shock (rainfall) in- dicator, to assess the productivity and equity-impact of market-medi- ated land sale and purchase as compared to non-market ones (in- heritance). The authors found that frequent disaster shocks increased land market activity. In addition, poor households have a chance to voluntarily sell their land to improve household welfare. Therefore, they concluded that sales markets improved productivity and helped purchasers accumulate non-land assets and significantly enhance their https://doi.org/10.1016/j.landusepol.2018.02.013 Received 15 June 2017; Received in revised form 14 December 2017; Accepted 9 February 2018 ⁎ Corresponding author. E-mail addresses: hongyanzhen1984@163.com (Y.-Z. Hong), hunghaochang@ntu.edu.tw (H.-H. Chang), fjdyw@163.com (Y.-W. Dai). Land Use Policy xxx (xxxx) xxx–xxx 0264-8377/ © 2018 Elsevier Ltd. All rights reserved. Please cite this article as: Hong, Y.-Z., Land Use Policy (2018), https://doi.org/10.1016/j.landusepol.2018.02.013