How does land titling affect credit demand, supply, access, and rationing: Evidence from China

Abstract Based on official survey data from the Chinese Ministry of Agriculture and Rural Affairs collected in 2010 and 2015, we use the difference‐in‐differences method to study how the Chinese land titling reform beginning in 2009 in tiers (“the Reform”) affected the demand, supply, access, and rationing on the Chinese rural credit market. Our main findings are: (1) the Reform increased households’ hidden credit demand, but not their effective credit demand; (2) the Reform had no significant effect on effective credit supply or a household's credit access; (3) the Reform increased the likelihood of non‐price credit rationing, in particular risk rationing; and (4) in the subsample of households living in counties where the local governments explicitly permitted the use of land as collateral, the Reform had a positive effect on credit supply; but in the subsample of households living in counties where land collateral was not explicitly permitted, the Reform was associated with an increase in non‐price rationing. Findings of this study are not only useful to assess the economic and social implications of rural land titling in China, but they also offer insights in understanding similar policies in other countries, particularly developing economies.