The Hukou and Land Tenure Systems as Two Middle Income Traps¡ªThe Case of Modern China

Guanzhong James Wen () and Jinwu Xiong ()
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Guanzhong James Wen: Department of Economics, Trinity College, Hartford, CT 06106, USA
Jinwu Xiong: Center for Market and Society, and School of Social Sciences, Tsinghua University, Beijing 100084, China

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2014, vol. 9, issue 3, 438-459

Abstract: China¡¯s prevailing hukou (household registration) system and land tenure system seem to be very different in their applications. In fact, they both function to deny the exit right of rural residents from a rural community. Under these systems, rural residents are not allowed to freely exit from collectives if they do not want to lose their entitlements, such as their rights to using collectively owned land and their land-based properties. Farmers are neither allowed to sell their houses to outsiders, nor allowed to sell to outsiders their rights to contracting a piece of land from the collective where their households are registered. For migrant workers from rural areas, it is extremely difficult for them to obtain an urban hukou with all its associated entitlements at an urban locality where they currently work and live. The combined effect of the two systems leads to serious distortions in labor and land markets, resulting in discrimination against migrant workers, sprawling yet exclusive urbanization, housing bubbles, and depressed domestic demand. These distortions further entrench the existing and much widened urban/rural divide. Unless these two systems are thoroughly reformed, the rural residents in Chinese mainland will be trapped in their comparatively much lower income and remain unable to share the gains from the agglomeration effects of urbanization.

Keywords: Hukou; land tenure system; middle income trap; monopsony; monopoly (search for similar items in EconPapers)
JEL-codes: D3 J7 O5 P3 Q15 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (7)

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