Transferability of hometown landholdings and rural migrants' entrepreneurship: evidence from a pilot rural land use reform in China

This paper examines how the transferability level of hometown landholdings affects rural migrants' entrepreneurship in their destination cities. We hypothesize that higher market-oriented transferability of hometown landholdings would promote the entrepreneurial engagement of rural migrants since it would not only alleviate the liquidity constraints of entrepreneurial ventures but also would boost rural migrants' willingness to get integrated into the local society which is beneficial for entrepreneurship success. To test this hypothesis, we exploit the quasi-experiment nature of a pilot rural land use reform in rural China implemented between 2015 and 2018, which constituted an exogenous change in the transferability level of hometown landholdings in the pilot areas. This reform increased compensation for rural land expropriation, allowed transactions of collectively-owned operating construction land (COCL), and promoted transactions of rural homestead land. Using data from the 2017 China Migrants Dynamic Survey (CMDS), we find that rural migrants outflowed from those pilot areas are associated with 5-7 percentage points of higher entrepreneurial propensity levels. This finding remained robust under a variety of model specifications. We also find that the reform led to a much higher propensity for engagement in necessity-based entrepreneurship as compared with opportunity-based entrepreneurship, and had stronger impacts on middle-aged and married groups. Overall, by documenting the spillover effect of rural land use reform on rural migrants' entrepreneurial activities in the cities, this paper contributes to extant knowledge by highlighting the complex interconnectedness between rural and urban economies. Implications of the findings for further rural land use reform as well as urban governance in China are discussed.