Household-level welfare effects of land expropriation: Evidence from China

A number of developing countries use land expropriation policies to expand cities and develop peri-urban areas. In China alone, an average of 1,600 square kilometers were expropriated annually between 2004 and 2018. The impact of this urban development strategy on expropriated households is not well-understood. I estimate the causal effect of expropriation on Chinese households' livelihood choice and earned income, relying on panel data and comparison to non-expropriated households to observe how household-level outcomes change in response to expropriation. Controlling for baseline outcomes, I find that for at least the first two years, expropriation reduces household agricultural participation and production but does not increase other types of income-generating activities. The result is reduced food security and ability to earn income. Compensation paid to households does not fully offset these effects in cases where households lose all their land or are uncompensated. These findings suggest concrete policies governments can implement to lessen the negative welfare impacts of urban development on expropriated households: higher compensation rates, development of rural non-agricultural labor markets, and direct food assistance to expropriated households.