Political and economic institutions shape growth patterns. Land, as a key production factor, plays an active role in shaping development patterns, through both formal and informal land institutions. This paper studies how informal land institutions have promoted an indigenous and inclusive growth pattern in Foshan city in transitional China,revealing that decentralization leads to bigger role of informal institution. This has contributed to more efficiency and a more fair distribution of benefits. Thanks to decentralized governance and land control, property rights of land are better defined and protected, village collectives and township governments are incentivized to use land more efficiently through fierce competition. A sufficient supply of cheap land in the informal land market allows the establishment of domestic private and collective enterprises, leading to an indigenously driven industrialization. Simultaneously, the joint-stock mechanism ensures villagers a fair share of gains from collective land. Considering conflicts between local practices and formal land institutions, this paper calls for an inclusive treatment of the informality that has characterized the growth pattern of developing regions, and a reassessment of the role played by collective land owners.
Key Words: Informal Land Institutions, Decentralization, Industrial Development, Growth
Patterns