Can legalization of farmland property rights increase grain yield and reduce fertilizer-related non-point source pollution? Evidence from the Reform of Separation of Three Land Rights

Abstract

Securing food supplies while raising farm incomes and reducing fertilizer-related pollution is a central challenge for China’s transition toward greener agricultural production. The Reform of Separation of Three Land Rights changed how farmland rights are defined and exercised, with potential consequences for the organization of agricultural production. Using provincial panel data from 2004 to 2023 and a difference-in-differences design based on staggered implementation, we estimate the reform’s effects on grain yield and fertilizer-related non-point source pollution. The estimates indicate higher grain yield and lower pollution intensity after reform adoption. The results are unchanged in the event-study and placebo tests, in a sample ending before the 2015 fertilizer-reduction policy, and under a heterogeneity-robust staggered DID estimator. Mechanism regressions point to three connected organizational changes: a more grain-oriented crop mix, a larger operating scale, and wider use of mechanized production services. The effects are stronger in regions with better rule-of-law conditions and in eastern and central China; the estimates for western China are not statistically distinguishable from zero. The study therefore links farmland-rights reform to both production and fertilizer-related environmental outcomes, while recognizing that the pollution measure does not cover every source of agricultural nonpoint source pollution.