Property Rights, Tenure Security and Forest Investment Incentives

Abstract

Determinants of farmers’ investment incentives in forestland have a significant impact on forest management and welfare improvement, but few studies in the literature have consonantly shown the causal linkage between perceived tenure security on forestland and farmers’ incentive to invest. This study explores the driving factors of forest investment and whether China’s collective forest tenure reform has stimulated such investment on individually controlled plots, by developing a conceptual model and corresponding econometric strategy. In addition to property rights, tenure security and investment propensity appear to be affected by many other factors such as household and plot characteristics. Tenure security is also explained by economic wealth, political influence, local institutional evolution, while forest investments are also affected by income structure, labor distribution, and credit constraint. The outcomes of the study fill a gap in the empirical evidence of a relationship between forestland property rights, tenure security, and investment incentives, with policy discussion on raising farmer’s valuing on their forestland, building infrastructure for rural credit market and land transfer market, and channels through which policy instruments work and achieve their goals.