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<p>Governments increasingly use pilot experimentation before national policy rollouts, but this strategy introduces policy uncertainty until reforms are permanently institutionalized. We study how resolving this uncertainty affects asset prices, exploiting China’s 2020 revision of the Land Management Law, which elevated previously experimental rural land reform pilots into a binding national legal framework. Using difference-in-differences estimates on land transactions in Deqing County from 2015 to 2022, we find that legal institutionalization increased rural construction land prices by 12.3%. This effect emerged immediately after institutionalization and gradually faded, consistent with belief updating and supply adjustment. Heterogeneity analysis supports the credible commitment channel: markets with greater state-owned enterprise (SOE) participation during the pilot phase show smaller effects, as state-owned enterprises’ privileged access to policy information had already driven prices toward uncertainty-free levels; and industrial land with 50-year tenure responds more strongly than commercial land with 40-year tenure, reflecting greater renewal risk exposure under shorter contracts. These findings highlight the asset-pricing costs of policy uncertainty and the value of credible commitment in transition economies.</p>

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From pilots to law: policy uncertainty in rural land reform and land prices in China

  • 期刊论文

  • 发表日期：

    2026年6月17日

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  • Guangyu Cheng,
  • Ziqing Yuan

摘要

Governments increasingly use pilot experimentation before national policy rollouts, but this strategy introduces policy uncertainty until reforms are permanently institutionalized. We study how resolving this uncertainty affects asset prices, exploiting China’s 2020 revision of the Land Management Law, which elevated previously experimental rural land reform pilots into a binding national legal framework. Using difference-in-differences estimates on land transactions in Deqing County from 2015 to 2022, we find that legal institutionalization increased rural construction land prices by 12.3%. This effect emerged immediately after institutionalization and gradually faded, consistent with belief updating and supply adjustment. Heterogeneity analysis supports the credible commitment channel: markets with greater state-owned enterprise (SOE) participation during the pilot phase show smaller effects, as state-owned enterprises’ privileged access to policy information had already driven prices toward uncertainty-free levels; and industrial land with 50-year tenure responds more strongly than commercial land with 40-year tenure, reflecting greater renewal risk exposure under shorter contracts. These findings highlight the asset-pricing costs of policy uncertainty and the value of credible commitment in transition economies.