When Land Expropriation Increases Income: Evidence from China’s Structural Transformation

While land expropriation historically impoverished rural populations in developing countries, we find contrasting evidence from China. Using nationally representative panel data and a generalised difference-in-differences approach, we show that expropriation increases household total net income by 8.7%, with larger long-term effects. Non-farm income rises by 16.5%, with salary income increasing by 40.5% as households shift to higher-productivity employment. This reverse pressure mechanism is strongest for agriculture-dependent households, those farther from urban centres, and those receiving higher compensation. Two mechanisms drive these results: forced labour reallocation and compensation functioning as bridge capital. China’s distinctive outcomes depend on rapid industrialisation, mandatory compensation, and complementary infrastructure investments, conditions rarely present elsewhere. These findings highlight how institutional context determines whether expropriation impoverishes or enriches affected populations.
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