Is a Self-Organized Structure Always the Best Choice for Collective Members? A Counterexample in China’s Urban–Rural Construction Land Linkage Policy

Abstract

Rapid urbanization in developing countries has widened the gap between urban and rural development, due to inefficient land markets and weak institutional systems in rural areas. China’s innovative “Urban–rural Construction Land Linkage” policy was designed to address this imbalance by encouraging rural land consolidation and creating a transferable development rights mechanism. While this approach has shown potential in improving the utilization efficiency of existing construction land and continuously supplying urban development space, concerns remain about its actual benefits to villagers and rural development, with some arguing it disrupts traditional livelihoods and favors government interests over rural needs. To respond to this debate, this study investigates two core questions: first, does China’s transferable land development rights (TDR) program genuinely improve rural welfare as intended; second, why does the theoretically preferred self-organized governance model sometimes fail in practice? To address these research questions, this paper develops a new analytical framework combining the IAD framework of Ostrom with the hierarchical institutional framework of Williamson to examine three implementation approaches in China’s TDR implementation: government-dominated, market-invested, and self-organized models. Based on case studies, surveys, and interviews across multiple regions, this study reveals distinct strengths and weaknesses in each approach in improving villagers’ lives. Government-dominated projects demonstrate strong resource mobilization but limited community participation. Market-based models show efficiency gains but often compromise equity. While self-organized initiatives promise greater local empowerment, they frequently face practical challenges including limited management capacity and institutional barriers. Furthermore, this study identifies the preconditional institutional environment necessary for successful self-organized implementation, including clear land property rights, financial support, and technical assistance. These findings advance global understanding of how to combine efficiency with fair outcomes for all stakeholders in land governance, which is particularly relevant for developing countries seeking to manage urban expansion while protecting rural interests.

1. Introduction

Since rapid urbanization has consumed substantial resources while leaving limited benefits for rural areas, achieving balanced urban–rural development remains a critical challenge for most developing countries. Compounding this issue, underdeveloped land markets and weak institutional frameworks in rural sectors have further exacerbated insecure property rights and socioeconomic inequality [1,2]. While some developed nations have implemented urban–rural collaboration models based on resource flows [3], persistent poverty in remote rural areas continues to pose significant challenges. To address this dilemma, China’s innovative “Linkage” policy may offer valuable insights. China’s State Council introduced the “Urban–rural Construction Land Linkage” policy (abbreviated hereafter as “Linkage”) on October 21, and it consisted of two basic factors: the sending area in the rural sector where the construction land can be consolidated into cultivated land, as well as the receiving area in the urban sector where cultivated land will be occupied for urban development.

According to the existing literature, China’s “Linkage” policy is believed to have effectively separated and commodified land development rights from collective land ownership, representing a distinctive form of Transferable Development Rights (TDR) within China’s dual land system [4,5]. When assessing policy effectiveness, a crucial consideration involves examining the actual benefits delivered to villages and villagers. However, unlike American TDR programs [6], China’s approach has generated significant scholarly debate regarding its rural impacts. On one hand, proponents argue that this distinctive TDR approach represents an institutional innovation that has facilitated rural land commodification while enabling villagers to benefit from urbanization [7,8]. Moreover, it also enhances the awareness of land rights among rural residents [9] and fosters well-planned, compact rural development with improved infrastructure [10]. Conversely, critics highlight the significant drawbacks of China’s TDR program. He (2013) contends that this policy will disrupt the traditional connection between agricultural production and rural livelihoods since it encourages high-rise housing in rural areas [11]. Moreover, local governments’ preoccupation with land quotas often overrides villager interests. Yin (2013) further argues that this policy has brought substantial social costs to villagers, including the challenges of adapting to new living environments, disrupted community networks, and elevated living expenses [12].

Regarding the problematic outcomes in “Linkage” implementation, Zhou (2014) identifies government-dominated projects as particularly prone to disregarding village interests, but he also observes a recent shift toward market-invested models [8]. A growing scholarly consensus emphasizes the critical role of bottom-up approaches in safeguarding villager welfare [5,13]. According to the existing literature, the self-organized governance model has gained global recognition, demonstrating effectiveness across diverse contexts, including Bolivian land governance [14], African socio-ecological systems [15], Swiss natural park management [16], Australian stewardship programs [17], African land administration [18], and Pakistani hillside management [19]. These cases consistently highlight its advantages in protecting property rights and facilitating collective agreements.

In an earlier publication, the present author has conceptualized China’s “Linkage” process as comprising two distinct phases: the “production” of land quotas through rural land consolidation, and the subsequent transfer of these quotas to urban areas [9]. The significant price differential between “Linkage” quotas and their production costs has created strong market incentives, attracting diverse investors and resulting in three predominant governance models: government-dominated, market-invested, and self-organized approaches. While self-organized governance has been widely advocated in natural resource management for its superior protection of collective members’ interests [20], this study identifies a counterexample in China’s “Linkage” implementation. To theoretically explain this anomaly and conduct a more comprehensive governance effectiveness comparison, this research addresses two key questions: (1) whether China’s TDR program genuinely benefits villagers as intended by policy objectives, and (2) whether self-organized governance consistently represents the optimal choice for village collectives and why.

To investigate these questions, this article (1) reviews relevant empirical and theoretical literature in Section 1; (2) establishes an analytical framework and conducts a theoretical analysis in Section 2; (3) introduces the research area as well as data sources and establishes a theoretical framework in Section 3; (4) examines the governance outcomes across different governance structures through empirical findings from Chengdu Municipality in Section 4; (5) discusses the impact mechanism, policy recommendations, contributions and limitations of this research in Section 5; and finally, (6) presents the conclusions in Section 6.

2. Theoretical Framework and Analysis

The scholarly literature presents divergent perspectives on the actual impacts of China’s “Linkage” program on rural development. To reconcile these conflicting views, this study makes an important analytical distinction between the national-level “Linkage” Policy and its localized project implementations, examining each through different institutional lenses. While existing research consistently demonstrates the advantages of self-organized governance structures in protecting property rights across various natural resource management regimes globally, China’s Transferable Development Rights (TDR) system presents a notable exception. To explain this counterexample, this study develops an innovative analytical framework that integrates Williamson’s Institutional Analysis Framework [21] with Ostrom’s Institutional Analysis and Development (IAD) approach. This synthesized framework incorporates transaction cost analysis to evaluate governance performance more comprehensively.

2.1. Theoretical Framework

The Institutional Analysis and Development (IAD) framework provides a robust analytical lens for examining and comparing governance structures. Developed by Ostrom [20], this approach centers on the concept of “action arenas” comprising action situations and participating actors. Moreover, material conditions, attributes of the community, and rules have a fundamental influence on the action arena and the interactions of participants, finally generating resource allocation outcomes. Through this framework, Ostrom systematically demonstrates how these factors collectively determine resource allocation outcomes while elucidating the comparative advantages of decentralized governance structures in managing common-pool resources.

Moreover, to open the “black box” of institutions, Williamson’s hierarchical framework delineates four levels of analysis: (1) embedded informal institutions (L1), (2) formal institutional environments (L2), (3) governance structures (L3), and (4) resource allocation outcomes (L4). This framework demonstrates how informal norms (L1), formal rules (L2), and governance mechanisms (L3) collectively shape institutional performance (L4). Notably, since formal institutions (L2) operate across multiple scales, formal rules encompass both national policies and local regulations. Finally, all three upper levels (L1–L3) interact to form dynamic, multi-tiered institutional systems. At the governance level (L3), Transaction Cost Economics provides a valuable analytical tool for comparative institutional assessment. Embedding the Institutional Analysis Framework by Williamson into the IAD framework, this research constructs a more comprehensive framework to examine the governance performance as well as the influential factors (Figure 1).

2.2. Theoretical Analysis: Action Arenas Under Three Governance Structures

As Ostrom delineates [20], governance structures establish distinct action arenas characterized by seven core elements: (1) participants, (2) positions, (3) permissible actions, (4) potential outcomes, (5) action–outcome linkages, (6) information availability, and (7) outcome-related costs and benefits. These arenas are further conditioned by clusters of institutional factors encompassing (1) boundary rules, (2) position rules, (3) choice rules, (4) scope rules, (5) aggregation rules, (6) information rules, and (7) payoff rules. Collectively, these factors generate unique incentive structures that determine both the efficiency and equity of project outcomes.

Over the past two decades, the IAD framework has evolved significantly, transitioning from static analyses to dynamic examinations of institutional evolution and decision-making within complex socioeconomic systems [22]. Building on this advancement, the present study utilizes a comparative institutional framework (Figure 1) to first explicate the action arenas emergent under each governance structure and then to analyze their effects on transaction outcomes. Given the substantial influence of institutional factors, the analysis integrates rule system examination with action arena characterization (Figure 2).

2.2.1. Boundary Rules and Participants

Distinct from conventional land rights, the operational mechanism of TDR projects in China follows a bifurcated process, including quota “production” and quota transfer. According to China’s national policy design, development rights are generally created through a “production” process involving engineering expenditures on land adjustment, comprehensive compensation packages for villagers, and institutional transaction costs (including information acquisition, negotiation procedures, and conflict mediation).

Regarding potential investors, county-level governments initially maintained exclusive control as quota producers during the early implementation phase, due to their privileged position in converting TDR quotas into urban construction land leases. However, since fiscal constraints have precluded local governments from single-handedly organizing all TDR projects, the establishment of TDR markets to attract private investment has become a common choice for some local governments. Under such local institutional contexts, three key actors have emerged as potential project initiators: (1) entrepreneurial local governments, (2) private investors, and (3) village collectives.

Thus, the market investors play dual institutional roles in TDR operation: quota producers through rural land adjustment and quota users through urban land leasing. Certain local institutional designs further incentivize participation. For example, Chengdu’s local policy mandates “Linkage” quotas as prerequisites for urban land auctions. This mechanism transforms quotas into sunk costs for developers, who subsequently adjust primary market bids downward to maintain profit margins, demonstrating how the rules shape the choice and incentives in an embedded institutional environment.

From a property rights perspective, village collectives hold the de facto ownership of rural land, while villager households possess use rights to their homesteads. This dual structure necessitates the inclusion of both stakeholders in any rural–urban TDR projects, as neither party’s interests can be disregarded without compromising the legitimacy and effectiveness of the transaction process.

2.2.2. Position Rules and Participant Positions

In an open market, the price of a TDR quota should emerge from an equilibrium between supply and demand. However, under China’s dual land system, the price of a TDR quota is primarily determined by the land reclamation potential in the rural sending areas, as well as the intensity of urban construction demand in the receiving areas. This deviation from the theoretical expectation stems from the institutional ambiguity of China’s rural lands. Specifically, the current legal framework lacks a precise definition of land development right, which enables the local government to administratively control both market sides [9]. As the managers of local development, the local authorities regulate quota supply through project approvals while also controlling demand intensity via urban land-use regulations. The resulting decentralized governance structure [23] leads to significant regional disparities in TDR market development, reflected in variations in approved quota quantities, spatiotemporal differences in urban land demand, uneven local fiscal capacities, and divergent compensation standard calculation methods.

Since the value of a TDR quota can only be realized in the primary urban land market in China’s practice, urban land users become the final demander of the quota. Therefore, they eventually pay for the quota through land leasing fees. As the final demanders of the TDR quota, normal urban land users usually face three options: (1) competitive bidding for conventional urban construction land at a higher price, (2) purchase of the TDR quota and bidding for the supplementary urban land at a lower price, or (3) direct investment in the TDR project and bidding for the supplementary urban land.

As both the de jure owner and de facto manager of rural land, village collectives have a de facto principal-agent relationship with villagers, which provides the collective unique institutional capacity to implement TDR projects and produce development quotas. Despite not being the direct implementer, the village collective still plays an indispensable institutional role in TDR project execution. As the legally recognized representative of the villagers, the collective serves as the negotiating agent with external investors in land transactions. The formal transfer process requires rural households to first return their homestead use rights to the collective, then the assembly collective-owned land property right can be transferred to the external investors following housing demolition and land reclamation. In some TDR projects, the compensation agreements are formally contracted between the collective and individual households.

Within China’s current institutional framework, villager interests in TDR projects receive protection primarily through mandatory policy requirements. Implementation practices reveal two key safeguards: first, local governments frequently incorporate villager participation rates as a critical evaluation metric during project selection; and second, villager satisfaction assessments are routinely included as compulsory components of project acceptance documentation.

2.2.3. Choice Rules and Permissible Actions

China’s dual land system endows entrepreneurial local governments with multiple roles that confer strategic advantages in TDR implementation, including selecting the sending areas (specific villages) for quota production, determining whether to permit external investment in TDR projects, and identifying specific investment targets. As the only supplier of urban construction land in the primary market, the authorities can always secure land leasing fees beyond the direct TDR profits, albeit at marginally discounted rates compared to conventional land leases.

When permitted by local policy, village collectives may independently initiate and organize TDR projects. Bound by rational decision-making constraints, the collective will invest only if the quota prices exceed the comprehensive project costs, just as the villagers participate only when anticipated benefits outweigh losses. Theoretically, in open or quasi-open TDR markets, the villagers possess primary agency in selecting operational partners among local governments, private investors, or collective organizations. This choice mechanism represents a significant institutional advancement over traditional state-dominated land acquisition regimes in protecting villager interests.

For remaining projects unattractive to the local government and village collective, private investors engage when net profits are achievable. As the potential investors in a TDR project, the market actors have two ways of utilizing the acquired land quota: trading in TDR markets or application for urban construction land. Investors preferring quota transfers typically make their investment decisions according to both the direct profitability and opportunity costs. Their investment calculus involves systematic comparison of a project’s return on investment (ROI) against societal investment averages, and only the TDR projects with supra-average ROI can attract market investment. Under conditions of stable TDR quota price, production cost constitutes the most significant variable influencing the returns of the market investors.

2.2.4. Scope Rules and Potential Outcomes

Comprehensively speaking, China’s TDR program generates dual-sector impacts by redistributing development potential from rural to urban areas. In urban sectors, the program increases construction land supply in primary markets by consuming additional development rights, thereby supporting ongoing urbanization and industrial modernization. Chengdu’s development strategy exemplifies this pattern, with most TDR quotas being transferred from peripheral rural areas to suburban development zones.

In rural sectors, the program operates as a fiscal transfer mechanism that channels portions of urban land revenue back to rural revitalization efforts. Moreover, it creates economic incentives for land reclamation that complement administrative mandates. However, topographic and edaphic disparities between the sending and receiving areas present significant policy challenges, as current mechanisms fail to ensure the consistent quality of newly reclaimed cultivated land.

2.2.5. Aggregation Rules and Action–Outcome Linkage

Fundamentally speaking, it is China’s dual land system that structures the general action arenas of its TDR implementation, while local policy innovations serve to expand market participation and enhance stakeholder incentives. This institutional framework creates two critical constraints for the direct transaction between the quota owners (village collectives) and quota demanders (urban land users). On one hand, since the value of a TDR quota can only be realized in the primary urban land market that is controlled by the local government, all projects must undergo stringent procedures to gain approval first. Thus, this system’s inherent asymmetries maintain local governments’ positional advantage as the gatekeepers of development rights conversion.

On the other hand, according to the existing literature, the collective land ownership system in rural China exhibits fundamental institutional ambiguities, and the realization of rural land value faces dual institutional constraints under China’s current property rights regime [24,25]. Since households only have limited use rights of their homesteads, their economic realization requires collective authorization, even when the collective itself organizes the development process. Moreover, state policies strictly regulate rural land commodification, so governmental actors retain the exclusive authority to determine the commercialized objectives as well as the commercialization methods. These intersecting restrictions create significant welfare implications, generating both direct economic losses for villagers and systemic inefficiencies in TDR implementation through elevated transaction costs.

Consequently, the collective’s cooperation substantially affects transaction costs, with their attitudes toward both the TDR program and potential investors significantly determining the scale of their operational support during implementation. Recognizing the collective’s pivotal role in cost management, the external investors (including the local government and the market investor) actively seek strategic alliances with the collectives through administrative pressure or economic inducements. However, this dynamic may create principal-agent challenges and lead to inadequate fulfillment of its fiduciary responsibilities toward villagers, potentially resulting in rights infringements.

2.2.6. Information Rules and Information Availability

China’s Transferable Development Rights (TDR) program operates through a hybrid institutional architecture that bridges public sector administration and private market mechanisms, as well as state-owned urban land systems and collectively owned rural land regimes. On one hand, China’s collective land ownership system and project-based governance framework create complex communication mechanisms that serve as key differentiators among governance structures and significantly influence transaction outcomes. This complexity manifests in two dimensions of information exchange between project initiators and rights-holders.

First, negotiations with rural land owners involve inherent ambiguities due to the abstract nature of “village collectives” as legal entities. In practice, both agent entities (e.g., collective economic organizations) and management entities (e.g., villagers’ committees) participate in negotiations to exercise collective land rights. The absence of a clearly defined “legal person” status renders these communication processes inefficient and often results in inadequate representation in decision-making. Second, project initiators must secure approval from fragmented and heterogeneous land users, a process that generates substantial transaction costs in TDR implementation. This dual-layer communication structure creates unique information challenges that vary significantly across different governance approaches.

On the other hand, the initiation and implementation of TDR projects entail complex multi-actor coordination across several domains beyond village collectives. Specifically, project establishment requires specialized inputs including land measurement, planning design, financial arrangements, and administrative approvals, and each of them demands distinct information from professional service markets, financial markets, and policy environments. During implementation, effective negotiation and supervision necessitate both TDR market intelligence and project management expertise.

2.2.7. Pay-Off Rules and Benefit–Cost Considerations

Due to their dual roles as both policy implementers and land market actors [26], local governments exhibit complex incentive structures in TDR project organization. Their monopoly position in primary urban land markets creates a distinctive investment calculus: projects are initiated only when urban land prices (not merely TDR quota values) surpass aggregate adjustment costs (typically less than 10% of land values). This asymmetric cost–benefit threshold, resulting in soft budget constraints, explains the predominance of government-dominated implementation models in China’s TDR system. However, administrative implementation pressures interact with these fiscal advantages to produce unique investment behaviors. Local governments frequently undertake projects with substantial social-ecological benefits, such as poverty alleviation and environmental remediation, even when the costs exceed market-determined valuations.

Economic rationality dictates that the developer will prefer direct TDR investment only if its internalized production costs (including land reclamation, compensation, and transaction costs) prove more efficient than market alternatives. Contrasting sharply with government-dominated approaches, market investors demonstrate greater sensitivity to land quota production costs. This cost-conscious orientation influences their decision-making, both in selective investment in individual projects based on cost efficiency and in driving stringent cost-control measures throughout project execution.

Similar to the market investors, the collectives also strategically exploit the price differential between market values and quota production costs to maximize project profitability. However, constrained by the agent–principal regime, their decision-making calculus extends beyond immediate financial gains to incorporate long-term village development considerations. Therefore, this dual orientation typically manifests in a hybrid quota allocation strategy for the collectives. They usually retain portions of TDR quotas to expand collective construction land assets, while selling the remaining quotas to recoup project investments and generate project profits.

As for the villagers’ interests, traditional benefit–cost analysis proves insufficient due to its inherent subjectivity and narrow economic focus. According to the existing empirical study, villager satisfaction in land consolidation initiatives depends not merely on compensation adequacy but significantly on participatory engagement levels. Recognizing the multidimensional nature of rural welfare, this study adopts villager-centered criteria to assess governance effectiveness, including compensation equity, resettlement quality, social welfare enhancements, participation depth, and overall satisfaction metrics.

3. Materials and Methods

3.1. Study Area

As boundedly rational actors, the local government, developers, village collectives, and villagers all seek to maximize their profits within specific budgetary constraints. These constraints shape their investment decisions based on distinct cost–benefit analyses. To evaluate the effectiveness of the three TDR models in safeguarding villagers’ interests, this study conducts an empirical analysis in Chengdu Municipality for three key reasons (Figure 3).

First, Sichuan Province was among the earliest pilot regions for the “Linkage” policy, and Chengdu, as its capital, has extensively experimented with policy design and implementation, establishing a relatively mature TDR framework. Second, as Zhou argues [8], TDR programs are most viable in regions with high urban land demand and low rural land prices, conditions that Chengdu fulfills due to its location in China’s rapidly urbanizing western region. Finally, over the past decade, Chengdu has implemented innovative local policies that have cultivated a robust rural land property rights market, offering critical insights for market-oriented land reforms. Our preliminary research indicates that over 35% of Chengdu’s urban–rural land development rights transactions employ either market-driven or self-organized governance [9].

3.2. Methodology

This paper argues that existing scholarly debates reflect fundamental theoretical divergences: economic perspectives prioritizing utilization efficiency versus sociological approaches emphasizing social welfare. More critically, the study highlights a key distinction between the “Linkage” policy as a central government mandate and its implementation through localized “Linkage” projects [26]. As Tan and Zhou (2015) demonstrate, China’s project-based governance system delegates substantial implementation authority to local actors, implying that policy outcomes are shaped by both the national framework and the specific governance structures through which projects are executed [23]. Consequently, this study analyzes China’s TDR program at the project level, examining the institutional rules, complex interactions, and outcomes across different action arenas. The protection of villagers’ rights serves as the primary governance outcome in this research, emerging from these action arenas and evaluated through comparative analysis of multiple dimensions.

3.2.1. Comparative Case Study to Examine Resource Exchanges

Through systematic collection, classification, and analysis of policy documents, we constructed a comprehensive institutional framework encompassing both national and local policies across two critical dimensions: (1) temporal development stages (policy design phase: 2004–2007; policy implementation phase: 2008–present); and (2) promulgation authority levels (policies issued by the Central Committee, State Council, and relevant ministries; formal legislation; and local government regulations with implementation plans).

To address the research question, a multi-stage cluster sampling technique was used. First, this study employed a stratified random sampling method to select 98 TDR projects across Chengdu Municipality, representing 25% of all projects approved by the Chengdu Municipal Cadastral Centre. The sample spanned 78 towns within 15 counties, ensuring broad geographical coverage. Drawing on application documents, acceptance records, and villager compensation contracts, we identified three distinct implementation modes: government-dominated, market-invested, and self-organized models. Second, for comparative analysis, under each governance structure, we randomly selected three corresponding cases in the project database of the Cadastral Centre: a government-dominated TDR project in Longquanyi District (Case 1), a market-invested TDR project in Pujiang County (Case 2), and a self-organized TDR project in Dujiangyan (Case 3).

The first government-dominated TDR project was located in Longquanyi District, with its sending area situated 37 km from Chengdu’s urban core. The district has an agricultural population comprising 65.45% of its total population, with per capita income levels approximately 28.55% above Sichuan Province’s average. As Longquanyi occupies Chengdu’s second urban ring (peripheral urban zone) and sustained earthquake damage exceeding 40% of its territory in 2008, the district government strategically leveraged national land policies. It consolidated multiple rural land adjustment initiatives under the “Linkage” program framework, effectively combining rural eco-migration projects with urban tourism development. This case exemplifies a common scenario in which local governments act as the primary actor, utilizing land policy as an instrument to achieve broader objectives such as urbanization, economic growth, and disaster recovery. The project’s location in the “peripheral urban zone” is also highly representative. As many Chinese cities undergo rapid expansion, the conversion of land in these peri-urban areas has become a major strategy for municipal development. The dynamics observed here—including high development pressure and proximity to urban markets—are prevalent across China.

The second case study featured a market-driven TDR project in Pujiang County, classified within Chengdu’s third urban ring (remote suburban zone). The sending area exclusively comprised Village J, an impoverished yet agriculturally significant village in this key agricultural county of Sichuan Province. The project’s geographical advantages—predominantly gentle hilly terrain unaffected by major earthquake damage—facilitated straightforward building demolition and land reclamation. Thus, the constrained project costs rendered this initiative particularly attractive to private investors. This case exemplifies the growing, though less common, phenomenon of market-oriented land development within rural revitalization initiatives. It demonstrates how land policy can be leveraged to attract investment to less-developed regions. The project’s location in a “remote suburban zone” is representative of countless counties situated beyond the immediate urban fringe yet still within a city’s economic orbit. Such areas are often designated as key agricultural counties, thereby facing the challenge of pursuing development without compromising food security.

The third case examined a self-organized TDR project in Dujiangyan County, where 65.79% of the territory comprises mountainous and hilly terrain. The sending area encompassed Village L, one of the most remote administrative villages in Dujiangyan, characterized by a 66.23% forest coverage rate. As a primary disaster zone of the 2008 Wenchuan Earthquake (located merely 10 km from the epicenter), Village L suffered the destruction of over 90% of its rural housing stock. Confronted with urgent post-disaster housing needs, village leaders independently initiated this TDR project through collective action. This case exemplifies a model of endogenous development and collective action at the village level. Although it is the rarest of the three models, its significance is substantial as it demonstrates the agency and adaptability of rural communities. The project’s context—characterized by mountainous and remote terrain—is representative of vast swathes of rural China, particularly in the western and southern regions. These areas are often ecologically fragile and economically disadvantaged, posing significant challenges for both top-down policy implementation and bottom-up community capacity.

3.2.2. Individual Interview and Questionnaire Survey

Facing the counterexample in China’s TDR practice, it is necessary to give a more cautious and comprehensive comparative analysis for various governance structures, but how? Unlike conventional land policies that prioritize maintaining urban construction land supply, China’s TDR program uniquely emphasizes rural development [27]. To examine the varying transaction outcomes under 3 governance structures, this study conducted a comprehensive review of the existing literature and selected five key evaluation criteria to assess and compare the effectiveness of TDR projects based on the established research findings: (1) compensation standards [28,29,30,31], (2) resettlement methods [32,33], (3) social welfare provisions [34,35,36], (4) level of villager participation [37,38,39,40], and (5) level of villager satisfaction [41,42]. Through this multidimensional assessment, the research aimed to provide nuanced insights into how varying governance approaches affect program outcomes in China’s unique institutional context.

To gather robust, nuanced data on the local perceptions, experiences, and impacts of China’s TDR projects under various governance structures, this study adopted a mixed-method, cross-sectional research design conducted in the field. First of all, the integration of quantitative (structured questionnaires) and qualitative (semi-structured interviews) data collection allowed for triangulation. Second, the research was conducted in situ—in the villages and communities where the land policies were implemented. This is essential for studying land issues, as it connects policy to its tangible outcomes on the ground, geography, and social structures.

Specifically, to evaluate villager cost–benefit outcomes, this study employed multiple data collection approaches: (1) semi-structured interviews (20–60 min duration) with key stakeholders including villagers, village leaders, and officials from township governments and county-level Land and Resources Departments; (2) comparative field research across all the case sites; and (3) for participation and satisfaction analysis, structured questionnaires administered by the research team to randomly selected villagers (n≈30 per case), yielding 32 valid responses for Case 1 (government-led), 28 responses for Case 2 (market-driven), and 30 for Case 3 (community-initiated).

This research employed a concise, multi-stakeholder framework to evaluate China’s Transferable Development Rights (TDR) policy. The methodology was structured around interviews with four key groups: government officials, developers, villagers, and village leaders. The interview protocol was designed for cross-comparison on core themes. All the stakeholders were asked about their primary motivations, perceived benefits, and preferred governance model, which efficiently highlighted conflicts and alignments in incentives across different implementation approaches. A central focus was the implementation process. Officials and developers were questioned on strategic criteria, major costs, and operational challenges. Conversely, villagers and leaders provided ground-level perspectives on fairness, participation, compensation, and resettlement outcomes. This contrast revealed gaps between policy design and lived experience. The framework also probed relational dynamics by examining how power and negotiations flow between groups—for instance, how officials manage village relations or how leaders mediate conflicts. This approach helped map the practical, on-the-ground governance structure that operates beyond formal rules.

To conduct semi-structured interviews and collect questionnaire data, the author conducted door-to-door surveys and adopted a convenience sample of households, to ensure diversity in age, wealth, and landholding size. Through this method, a researcher can explain questions, clarify ambiguities, and assist respondents having low literacy, ensuring higher data quality. The collected data underwent systematic processing through methodological triangulation, followed by qualitative thematic analysis, descriptive statistical analysis, and correlation analysis.

(1)

Compensation Structure

This study examined both monetary and physical asset compensation. Monetary compensation includes either lump-sum payments or recurring disbursements for homesteads and occupied arable land. Physical asset compensation primarily consists of resettled houses, as well as equity shares in collective-owned enterprises where such options exist.

(2)

Resettlement Method

The resettlement methodology directly impacts villager welfare through multiple dimensions: geographical proximity to agricultural land, architectural design facilitating household production and community interaction, living expenses, ancillary infrastructure (including drainage systems, potable water supply, and communal spaces), and reallocation and utilization of newly added construction land.

(3)

Social Welfare Provisions

Villager welfare encompasses state-sponsored insurance programs and collective benefits, including retirement pensions, healthcare coverage, and supplementary support services.

(4)

Participatory Assessment Metric

Firstly, villager engagement was quantified through a six-phase implementation process: site selection, site assessment, planning and design, compensation and relocation, land reclamation, and redistribution of newly cultivated land. Then, level of participation was examined through villagers’ right to information and their actual participation, respectively, and each was coded binarily (1 = had information access/became involved, 0 = no information access/no participation) at each stage, with aggregate scores normalized to create a comparative participation index across cases.

(5)

Satisfaction Assessment Metric

While most existing evaluations of “Linkage” projects employ qualitative methodologies with limited analytical precision, this study advances the field through a mixed-method approach combining standardized questionnaires and semi-structured interviews. Villager satisfaction was quantitatively assessed using a 5-point Likert scale ranging from “very satisfied” (5) to “very unsatisfied” (1), with particular attention to compensation components. The comprehensive satisfaction measurement framework is presented in

Table 1. Indicator system of Satisfaction Assessment Metric.

Objective	Criterion	Index
Degree of Satisfaction	A1 Satisfaction on compensation	A11 Satisfaction on disposable monetary compensation
		A12 Satisfaction on continuous compensation
		A13 Satisfaction on shares in collective-owned enterprises
	A2 Satisfaction on resettlement	A21 Satisfaction on location
		A22 Satisfaction on the building structure
		A23 Satisfaction on resettlement cost
		A24 Satisfaction on living cost
		A25 Satisfaction on other facilities
		A26 Satisfaction on the development of collective construction land
	B3 Satisfaction on welfare	A31 Satisfaction on pension insurance
		A32 Satisfaction on medical insurance
		A33 Satisfaction on other service facilities

.

Based on the questionnaire data, this paper employs a structured quantitative approach to assess villager satisfaction across three TDR projects. To ensure a fair comparison, the analysis focuses on common satisfaction items that received a high response rate. The data for both the right to know and the degree of participation are binary. A total participation score was calculated for each villager by taking the mean of their responses. These descriptive statistics provide the core metrics for comparing the central tendency (mean) and dispersion of opinions (variance) among the three villages.

4. Results

4.1. Compensation Structure and Outcomes Across Governance Structures

(1)

Government-dominated Model (Case 1)

This project was implemented in Longquanyi District, a region characterized by a unique economic and geographical paradox. Despite encompassing mountainous terrain severely affected by the 2008 Wenchuan Earthquake, it also functions as a key urban expansion zone for Chengdu. The initial land use was predominantly agricultural and fragmented, with forest coverage and cultivated land varying significantly between the two villages. The project implementation consolidated 539 fragmented land parcels and resettled 995 households into a town near the city expressway. This process dramatically altered the land use structure: cultivated land increased by 11%, while rural homestead area decreased by 49.47%. Ultimately, the project generated 311.75 mu of TDR quota for urban use, demonstrating a state-led model that prioritizes large-scale land restructuring and quota production to fuel urban growth, despite high initial administrative costs.

The compensation framework followed district land acquisition standards, and compensation calculations incorporated the following:

Monetary Compensation paid by the government: Homesteads, dwellings, and ancillary structures valued by surveyed area (CNY 100,000–380,000/household; modal range (CNY 150,000–250,000); relocation support (CNY 200/household moving assistance).

Physical Asset Compensation: Subsidized rates (CNY 180/m²) for 35 m² high-rise apartments, reducing household costs to CNY 20,000–25,000 (vs. government expenditure of CNY ~233,617/household).

Performance incentives: Seven-day vacancy period post-payment, requiring surrender of land use and property certificates; CNY 15/m² bonus for timely relocation (CNY ~2000/household).

(2)

Market-driven Model (Case 2)

Located in Chengdu’s outer suburban zone, Pujiang County is a significant agricultural producer with a land use pattern dominated by cultivated land (30.87%) and forest cover (34.4%). The local economy specializes in high-value crops such as tea, citrus, and gooseberry. Driven by a private developer, this project efficiently consolidated 101 land parcels. Unlike the government-led model, resettlement was flexible and in situ, allowing villagers to remain within their original community boundaries while moving into new homes having improved access to transportation infrastructure. The project dramatically increased population density (from 2.09 to 13.33 persons per mu) and reclaimed 394.75 mu of rural homestead land for cultivation, thereby generating 361.46 mu of TDR quota. This case exemplifies a market-efficient model in which favorable topography and clear financial incentives enable cost-effective quota production, while villagers retain sufficient leverage to negotiate favorable terms.

Monetary Compensation paid by the developer: (1) CNY 10,000/household for reconstruction; (2) CNY 17,000/household for land reclamation; (3) supplemental payments (CNY 80/m²) for homesteads exceeding 70 m²/person; (4) early demolition bonuses (CNY 20/m²); (5) interim living stipends (CNY 80/month/villager during construction delays).

Physical Asset Compensation: Uniform 35 m²/person allocation for 828 affected villagers (245 households); purchase price at CNY 1000/m² (offset by CNY 27,000 individual compensation).

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Self-organized Model (Case 3)

Village L in Dujiangyan County is a remote, mountainous area having 66.23% forest coverage. Following the Wenchuan Earthquake, the urgent need for housing—combined with its remote location and specialized land use—rendered the village unattractive to external developers, compelling the community to act independently. Having been excluded from both government and market-led projects, the village collective initiated its own TDR program. Achieving a 97% participation rate, the community managed the entire process, from land consolidation in 2012 to the construction of new resettlement housing by 2014. This grassroots effort not only addressed the immediate housing crisis but also demonstrated how self-organization can succeed where other models fail, particularly in remote, ecologically fragile, or disaster-stricken areas where financial incentives for external actors are limited. Crucially, the project prioritized community needs over pure quota generation.

Monetary Compensation: Compensation based on household size (no detailed structure valuation).

Physical Asset Compensation: Land allocation: 35 m²/person for housing + 40 m² for infrastructure; unequal rent distribution (only 1 year paid for occupied farmland); poor construction quality (leaks, peeling walls) and risky resettlement locations near hazard zones.

4.2. Resettlement Conditions Across Governance Structures

4.2.1. Resettlement Housing Characteristics

The government-led “Linkage” project in Longquanyi District established a modern residential community featuring diversified housing options to accommodate varying household needs. The development included one-bedroom, two-bedroom, and three-bedroom apartment units, with allocations determined by family size. For instance, a four-member household could select two 2-bedroom apartments totaling 140 m² of living space. The municipal government ensured equitable distribution through standardized site plans and architectural blueprints, as illustrated in Figure 4. This systematic approach to housing allocation demonstrates the capacity of government-directed projects to deliver comprehensive residential solutions while maintaining spatial equity among participants.

In contrast, the market-driven initiative in Pujiang County implemented a hybrid resettlement strategy that combined clustered multi-floor buildings with traditional single-family homes (Figure 5). The developer, Company H, constructed a spectrum of housing units ranging from compact one-bedroom to spacious five-bedroom configurations to accommodate diverse family structures. While this approach optimized land use efficiency by concentrating smaller units in multi-story buildings, it created accessibility challenges for elderly residents in single-person households. The siting of the resettlement area adjacent to national highways and within the original village boundaries resulted from participatory decision-making through the villagers’ congress. This model highlights both the potential benefits and practical limitations of market-oriented approaches to rural resettlement.

The community-led project in Dujiangyan adopted a distinct approach focused exclusively on single-family dwellings (Figure 6). The field interviews revealed significant design deficiencies in the housing allocation system, particularly for smaller households. The constrained availability of suitable land parcels necessitated clustering multiple compact units on shared lots, creating suboptimal living arrangements. This resettlement strategy prioritized maintaining traditional housing forms over spatial efficiency, reflecting the community’s preferences but also demonstrating the technical limitations of self-organized projects.

4.2.2. Future Development Opportunity Analysis

National policy framework, particularly the State Council’s Notice on Strictly Regulating Pilot Projects for Urban–Rural Construction Land Linkage and Effectively Carrying Out Rural Land Consolidation issued in 2010, mandates that “Linkage” projects must prioritize rural development needs before transferring any remaining quotas to urban areas. The Chengdu municipal government reinforced this principle by requiring village collectives to retain at least 5% of generated quotas. However, empirical analysis of 98 project cases reveals significant policy–practice gaps, with 96% of quotas ultimately transferred to urban sectors and some projects actually reducing available rural construction land for business use.

The government-dominated TDR project in Longquanyi complied with quota retention requirements by dedicating 25 mu (5% of the total quota) to rural infrastructure and collective commercial properties. These assets, including retail spaces near the resettlement area, offered villagers investment opportunities through a share-purchase system priced at CNY 15,000 per 10 m². While this approach preserved some rural development capacity, the limited quota allocation constrained more ambitious entrepreneurial initiatives.

Market-invested projects exhibited greater variation in quota management. The Pujiang County case utilized 32.35 mu (8.2% of the quota) for resettlement area construction, allocating 35 m² per villager for housing and an additional 15 m² for infrastructure. This included development of a cultural activity center intended for conversion to a folk museum, but the lack of reserved land for future expansion has hindered this tourism initiative. The constrained quota retention in market models reflects the tension between investor profitability and sustainable rural development.

Self-organized projects faced the most significant challenges in maintaining development potential. The Dujiangyan case demonstrated a net reduction of rural construction land from 82.4 mu to 22.8 mu, as financial constraints forced the collective to reclassify and sell almost all the produced land development rights to the urban sector. This created a paradoxical situation where villages must subsequently purchase TDR quotas from other communities to enable future growth if policy permits.

4.3. Social Welfare Provision

The government-led TDR project in Longquanyi District relocated villagers to a strategically located flatland area within another township, featuring superior infrastructure development. According to the Notice on Social Security for Land-Expropriated Farmers of Chengdu Municipality issued in 2009, the municipal government financed the conversion of the villagers’ household registration status to urban residence and their enrollment in urban social security systems. Thus, resettled villagers received both the Certificate of Use Right of Collective Land and Certificate of House Ownership for their modern apartment units. These dwellings maintained their collective land designation, legally prohibiting sales to urban residents under current land tenure systems. However, the proximity to urban areas created an informal housing market where some villagers transacted their properties at below-market rates. This comprehensive approach facilitated socioeconomic integration while maintaining legal land use restrictions.

Both the market-driven Pujiang County initiative and the self-organized Dujiangyan project implemented similar documentation protocols for participation, requiring villagers to surrender the use right of their original homestead and property ownership certificates. Upon relocation, residents obtained updated certificates for their new dwellings. However, the remote locations of these resettlement areas—situated far from urban centers—effectively eliminated secondary housing markets, as the properties held little appeal beyond immediate village needs. Unlike the Longquanyi case, these projects did not include provisions for changing the residents’ social welfare status or household registration classification. The maintenance of pre-existing social security arrangements reflects the more limited scope of benefits in non-government-led models, particularly in their capacity to facilitate rural–urban transition beyond physical relocation.

4.4. Participatory Assessment Metric

First of all, according to the Implementation Opinions on Strictly Regulating the Pilot Work of Urban–Rural Construction Land Linkage and Effectively Carrying Out Rural Land Consolidation issued by Sichuan provincial government in 2011, the protection of villagers’ right to information constitutes a fundamental requirement for safeguarding their interests in “Linkage” project implementation. This study maintains that the right to know serves as the essential foundation for meaningful villager participation in these projects. Our research framework identifies six critical stages where information disclosure is paramount: (1) site selection, (2) site investigation, (3) planning and design, (4) compensation and resettlement, (5) land reclamation, and (6) reallocation of newly added cultivated land. The seven items of villagers’ right to know were binary (1 = Yes, 0 = No), and a total participation score was calculated for each villager. As demonstrated in

Table 2. Villagers’ right to information across governance structures.

Project Stage	Case 1	Case 2	Case 3
Selection of Resettlement Area	0.25	1	0.917
Surveying on the Sending Area	0	0.071	0.417
Design of Project Implementation Plan	0.125	0.571	0.683
Determination of Compensation Standard	0.375	0.643	0.833
Determination of Resettlement Method	0.375	0.643	0.917
Building Demolition and Land Reclamation	0.3125	0.571	0.883
Distribution of Newly Added Cultivated Land	0.125	0.143	0.5

, our questionnaire-based assessment reveals significant variation in information transparency across the three governance models.

Through the same method, the degree of participation of villagers in these six “Linkage” projects was obtained (

Table 3. Villagers’ participation degree across governance structures.

Project Stage	Case 1	Case 2	Case 3
Selection of Resettlement Area	0.063	0.643	0.917
Surveying on the Sending Area	0.125	0.214	0.5
Design of Project Implementation Plan	0.125	0.143	0.667
Determination of Compensation Standard	0	0.071	0.484
Determination of Resettlement Method	0.063	0.267	0.75
Building Demolition and Land Reclamation	0	0.179	0.5
Distribution of Newly Added Cultivated Land	0.063	0.143	0.383

).

The results from Table 2 and Table 3 demonstrate that self-organized TDR projects achieve significantly better protection of villagers’ right to information compared to other governance models. Such an integrated approach can effectively mitigate opportunistic behaviors among participants while simultaneously enhancing the community’s adaptive capacity to manage coordination uncertainties during project implementation.

In contrast, government-dominated TDR projects exhibit more constrained participatory outcomes despite their well-established management systems. These projects primarily rely on standardized administrative controls and top-down decision-making processes, which inherently limit opportunities for meaningful villager participation. The rigid bureaucratic structure, while ensuring procedural consistency and organizational stability, creates institutional barriers that prevent the incorporation of grassroots knowledge and preferences into project planning and execution.

4.5. Satisfaction Assessment Metric

To measure the degree of satisfaction of villagers, the common compensation methods included in the questionnaire are listed in Section 3.2.2, and the average score of the valid data was obtained (

Table 4. Villagers’ satisfaction degree across governance structures.

Compensation Component	Case 1	Case 2	Case 3
One-off Cash Compensation	5	1.33
Continuous Cash Compensation	5
Shares in Collective Property	3.67
Location of the Resettlement House	4.31	4.38	3.92
Structure of Resettlement House	4.63	4.14	4.58
Cost Borne by Villagers	4.58	3.17	4
Cost in the Resettlement Area	4.73	3.67	4.167
Other Infrastructure	5	4.71	4.58
Utilization of Collective Construction Land	4	3.4
Social Security Service	4.83
Other Service	4.63	3	3.4
Distribution of Newly Added Cultivated Land	3.67	4.43	3.73
Property Right of Resettlement House	5	3.67	3
Degree of Participation	3.83	3.89	3.83
Right to Know	4	3.78	3.83

).

This analysis employed a structured quantitative approach to assess villager satisfaction across three Transferable Development Rights (TDR) projects. To ensure a fair comparison, the analysis focused on common satisfaction items that received a high response rate. The questionnaire data reveal significant variance in satisfaction among the three villages. Case 1 reported the highest overall satisfaction, followed by Case 2, with Case 3 showing the lowest average satisfaction. Correlation analysis indicates that information transparency and the perception of benefits—particularly those related to housing location, structure, property rights, and infrastructure—demonstrate the strongest positive correlation with overall satisfaction. Specifically, satisfaction is most strongly tied to benefits that directly impact quality of life. Participation also correlates with satisfaction, but the strength of this relationship varies by case. Satisfaction was highest when the delivered housing met or exceeded expectations on these key points, as seen in Case 1. Conversely, satisfaction was significantly lower when issues were present, such as the lower scores on housing quality metrics in Case 3. Demographic factors, including income and family size, showed weak or inconsistent correlations with satisfaction.

In the government-led initiative, the villagers were generally satisfied with the substantial benefits including modern apartments, significant cash compensation, urban residency status, full social security coverage, and shares in collective commercial properties. The correlation analysis indicates that participation was a highly significant factor influencing overall satisfaction. When the villagers were involved in project stages—such as project design or determining compensation standards—their input appears to have been genuinely considered and incorporated. This process fostered a sense of ownership and agency among the participants. Yet they also bore two primary costs: increased distance to contracted farmland (leading many to transfer land rights or maintain temporary field shelters) and elevated living expenses in modern residential areas. However, the latter was widely accepted as reasonable.

The market-invested project demonstrates both advantages and limitations in their governance approach. The decentralized negotiation process and flexible pricing mechanism created meaningful spaces for villager participation in project design and oversight. However, cost-saving measures, particularly the hybrid self-construction/unified-construction approach, generated significant dissatisfaction. The requirement for additional resident payments (e.g., CNY 32,000 for a four-person household), appears less attractive compared to fully subsidized government projects. This tension reflects the inherent conflict between developer profit motives (typically seeking 15–20% returns) and rural social welfare considerations.

The self-organized project excelled in participatory dimensions, consistently protecting the villagers’ right to information and enabling substantive involvement. However, its performance varied considerably across critical quality indicators including building standards, infrastructure development, and land utilization, which are heavily dependent on the socioeconomic capacity of individual villages. As Section 2 analyzes, constrained financing options and limited access to market information or technical expertise pose fundamental challenges. The third case study exemplifies how these constraints can compromise project quality and collective benefits when villages attempt complex developments beyond their organizational and financial capacity.

5. Discussion

The preceding analysis reveals that potential investors in China’s TDR program adopt absolutely distinct strategic approaches rooted in decentralized cost–benefit calculations to advance their respective interests. Three fundamental elements emerge as critical for successful implementation: (1) substantial investment commitment from project initiators, (2) genuine voluntary participation among villagers, and (3) robust institutional support from village collectives. These components interact dynamically within different governance structures through rule-mediated strategic engagements, producing observable variations in action arenas, as well as in governance outcomes.

5.1. Impacts of Action Arenas on Transaction Outcomes

Within the corresponding action arena of each governance structure (Figure 1), the actors who can engage in a transaction are defined by boundary rules at the central and local levels. The roles and decision-making mechanisms of these actors are collectively determined by position, choice, and scope rules. The resulting benefit–cost balance is shaped by payoff rules, in addition to the transaction costs incurred through negotiation, coordination, and supervision. Furthermore, both aggregation and information rules influence transaction complexity, which subsequently determines the final project profits and the ensuing allocation of results.

This comprehensive institutional analysis framework highlights three dimensions that are often overlooked in existing land governance research. First, the institutional environment, which clarifies various rules, should be both the starting point and the destination of governance research. This environment ultimately determines final transaction outcomes and policy performance through its shaping of action arenas. This perspective is particularly important for policymakers at both the central and local levels when designing, implementing, and improving resource governance policies. Second, whether the focus is on resource utilization efficiency or benefit allocation outcomes, the analysis of stakeholder perspectives and interactions remains critically important, and this has been regarded as the core of institutional analysis. Third, while balancing efficiency and equity remains a persistent challenge in social science research, these objectives are not always mutually exclusive. The efficacy of processes within the action arena ultimately influences governance outcomes, including the allocation of benefits to the community.

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Government-dominated Approach

The government-dominated governance model centers on a bilateral transaction structure between local governments and villagers. Specifically, the local governments act as project initiators to pursue three primary objectives: first, maximizing TDR quota production; second, minimizing implementation costs; and third, securing positive performance evaluations from superior authorities. Concurrently, as holders of homestead use rights, the villager participants principally focus on compensation adequacy across one-time monetary payments, resettlement conditions, allocation of newly created arable land, and long-term income generation opportunities.

Their roles demonstrate a distinctive incentive alignment when compensation meets villager expectations. Due to its dual accountability to both political superiors and local constituents, the local government usually provides stronger safeguards for villager interests than market-invested models. Furthermore, the substantial revenue differential between urban land leasing (typically yielding 8–12 times TDR quota values) enables and incentivizes local governments to offer above-market compensation, despite the reduced project profitability.

However, the system remains vulnerable to governance failures due to the fundamental tension between the redistributive potential and susceptibility to elite capture. When participation thresholds are unmet, local officials may engage in collusive practices with village cadres, deploying administrative coercion and disproportionate profit-sharing arrangements, which will effectively marginalize ordinary villagers. In the long term, the primary government objective of maximizing TDR quota production can create a disconnect between the new urban zones built to accommodate relocated villagers and actual economic demand. The long-term result is often the creation of underutilized or vacant “ghost” neighborhoods that offer inadequate job opportunities. This forces residents to endure long commutes or face unemployment, thereby creating a phenomenon of “phantom urbanization”.

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Market-invested Approach

The market-invested model delegates rural land development organization to private developers operating under profit-maximization objectives. Compared to government-dominated approaches, market mechanisms create distinct operational dynamics. Within this framework, the developers must strategically balance two competing imperatives: offering sufficiently attractive compensation packages to secure villager participation (which constitute the primary cost component), while simultaneously ensuring project returns exceed the prevailing market averages. These dual requirements establish rigid parameters for villager compensation, lacking the fiscal flexibility of government implementations.

From an institutional perspective, this model demonstrates several unique characteristics. Compared to local governments, market investors possess significantly less administrative leverage over village cadres, reducing the potential for coercion but also weakening hierarchical coordination capacity. However, the competitive landscape among the developers enhances villager autonomy through increased project alternatives, thereby diminishing the likelihood of exploitative practices. These features collectively improve the process efficiency of project implementation while altering the power dynamics in project negotiations.

Nevertheless, this model also exhibits inherent limitations in sustainable development outcomes. Due to the lack of political accountability mechanisms that constrain government actors, market-driven implementations tend to prioritize short-term quota production over long-term rural revitalization objectives. Moreover, this dynamic illustrates a fundamental institutional trade-off inherent in market-driven development models. On one hand, this model makes property right transaction smoother and gives the villagers more bargaining power. On the other hand, it also reduces the profits share allocable to the villagers and constrains the potential for integrated rural transformation. Additionally, the focus on minimizing costs and maximizing quota output fosters a minimalist approach to development. Consequently, developers lack incentive to invest in projects that do not directly contribute to profitability, such as vocational training programs, cultural preservation initiatives, or facilities for nascent local industries. As a result, the long-term economic foundation of resettled communities often remains fragile, relying on one-time compensation payouts rather than a newly created, sustainable economy.

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Self-organized Approach

In self-organized TDR projects, the primary stakeholders are the villagers and the village collective, whose interactions are relatively straightforward. For such projects to commence and be effectively managed, the villagers must voluntarily participate through the collective governance structure, ensuring maximal protection of their self-determination rights. Beyond direct profits, these projects yield additional benefits, including improved living conditions, expanded collective construction land for commercial use, and more engagement avenues in collective governance, which collectively enhance both individual and communal welfare. Consequently, even when quota production costs marginally exceed the TDR quota price, the village collective may still opt to proceed with the project.

Because the community controls the process, it can prioritize long-term well-being over short-term profit. This approach includes preserving culturally significant sites, designing resettlement areas that maintain social networks, and integrating development with the local cultural identity. Furthermore, the village collective retains nearly all the surplus value and newly created construction land from the TDR transaction. These assets can be reinvested into collective-owned enterprises, specialty agriculture, or rental properties, thereby creating a virtuous cycle of endogenous growth.

According to the analytical framework (Figure 1), transaction costs serve as a critical factor in comparative institutional analysis, as they directly influence total project profits and subsequent profit distribution. Although self-organized structures are frequently advocated in the land governance literature, their applicability conditions remain underexplored in this research area. Inspired by Ostrom’s seminal work [20], self-organization is widely regarded as a functional arrangement for internalizing external problems and promoting sustainable resource management. The extent and outcome of collective action, however, are determined by several social-ecological system (SES) factors, including the size of the resource system, the number of actors, leadership, social capital, the importance of the resource, the existence of operational-choice rules, and the existence of informal monitoring mechanisms [43].

When comparing the performance of various self-organized TDR projects, a central question arises: Why do some projects demonstrate superior outcomes while others do not? According to our previous research, the size, location, and quality of rural construction land can create favorable conditions for collective action in rural land governance [26,44]. Nonetheless, factors such as group size, the number of involved villages, and the extent of social capital accumulation often lead to divergent governance outcomes [45]. Common variables that hinder collective action include mistrust among the actors, internal conflicts, a lack of governmental support, and resource unit mobility [46,47]. Consequently, unsatisfactory self-organized cases have been reported across various resource management domains, including fisheries [47], freshwater resources [48], and marine resources [49].

More specifically, due to particular transaction risks—such as external information asymmetry and opportunistic behaviors originating from outside the collective community [44]—both market mechanisms and self-organization modes face higher transaction costs in China’s TDR governance than in other countries [50,51]. In summary, China’s “Linkage” policy shares fundamental characteristics with international TDR programs, functioning as a constrained tradable quota system designed to internalize development externalities through market mechanisms. However, it exhibits distinct institutional features. A comparison with American TDR practices reveals major differences in governance structures, the legal definition of rights, market liquidity, and stakeholder participation patterns.

Following continuous exploration of institutional arrangements for natural resources, this research provides further analysis of the interaction mechanisms within various governance structures, as well as empirical evidence on the unsatisfactory outcomes of self-organization modes in complex transactions, as exemplified by China’s TDR projects.

5.2. Policy Implication

While established by China’s central government, the “Linkage” policy delegates implementation authority to local governments, enabling operational flexibility to accommodate regional circumstances. Under such a project-based land governance system, Chengdu’s TDR program demonstrates the critical role of institutional environments in shaping governance structures and transaction outcomes. This local experience can provide valuable insights for other regions in three key areas: clarification of rural property rights, development of robust rural land markets, and implementation of preferential financial policies for TDR investors. According to the analysis above, rigid pricing, government monopoly, and collective ownership constraints affect all models, but they manifest differently. In this regard, this research provides targeted solutions for each governance structure.

Despite these institutional advancements, Chengdu’s practice reveals three fundamental challenges that constrain optimal policy implementation. First, China’s dual land system creates pricing mechanism constraints by decoupling TDR quota prices from urban construction land values. Instead of market-based pricing, quota values are determined by government-guaranteed minimum purchase prices. This rigid pricing structure limits the range of commercially viable TDR projects, creates narrow profit margins that deter market investors, and imposes significant budget constraints on both private developers and self-organized initiatives, ultimately compromising project outcomes and scalability. In the three examined TDR cases in Chengdu, the majority of market-invested projects are situated in Pujiang County, which features flatter terrain and lower compensation standards (Case 2). In contrast, investors encounter limited incentives to engage in post-disaster reconstruction projects or in projects located in remote, hilly areas. This challenge is particularly pronounced in self-organized projects. As illustrated by Case 3, substandard resettlement housing quality represented the most significant factor contributing to participant dissatisfaction. Furthermore, the village collective was compelled to liquidate all the TDR quotas without reserving any for future development to finance project costs and service bank loans. These operational challenges ultimately stem from deeper institutional constraints: undervalued TDR quotas and the limited financial capacity of rural collectives.

Second, while some TDR markets have been established at the local level, governments still maintain monopoly control over critical processes including project approval, examination, and platform operation. This creates an uneven playing field where developers and village collectives can only compete in quota production while facing substantial information asymmetries. Furthermore, the current system marginalizes grassroots preferences in rural construction decisions, creating systemic vulnerabilities for property rights holders. The most significant insight from Chengdu’s experience is its innovative local policies, which stimulate broader stakeholder participation in TDR production and create space for governance diversity in quota generation. Currently, the right to choose functions as the most effective mechanism for protecting villagers’ interests. However, the quasi-market nature of TDR operations, coupled with sophisticated administrative procedures and requirements, continues to pose a major challenge for non-governmental project leaders—particularly for village cadres, as exemplified by Case 3.

Third, collective ownership constraints continue to hinder optimal implementation. Despite progress in property rights clarification, fundamental limitations remain due to persistent collective ownership ambiguity. Village cadres retain opportunities for rent-seeking behavior, while village collectives face disproportionate transaction costs stemming from their lack of market entity status, policy information asymmetries, and limited management capacity. These factors collectively reduce the actual benefits flowing to collective members and constrain the potential for rural land capitalization.

5.2.1. Policy Implication for Government-Dominated TDR Projects

On one hand, due to pressures from administrative appraisal systems and the substantial profits available in the primary urban land market, government-dominated TDR projects can allocate a greater share of urban land revenue to the rural sector to promote its comprehensive development. On the other hand, this top-down approach may marginalize grassroots participation, and its long-term sustainability is questionable. To address these problems, this research proposes two specific policy suggestions.

First, mandatory third-party social impact assessments (SIAs) should be conducted prior to project approval, with the results directly informing the compensation standards and resettlement design. Furthermore, governments should establish detailed regulations regarding the extent, type, and timing of information disclosure to villagers, as well as specify the exact project stages that require villager participation.

Second, beyond the planning documents for the sending and receiving areas, policy must clarify comprehensive requirements for the resettlement area itself. For instance, TDR quotas and project approvals should be contingent upon the resettlement area’s development being integrated into a certified, feasible economic plan that includes job creation strategies, public service provision, and infrastructure financing. This will ensure the new urban space is functional and sustainable, rather than merely a vessel for generating land revenue.

5.2.2. Policy Implication for Market-Invested TDR Projects

For the Market-Invested Model, the core risks involve short-term profit extraction, value drain from the community, and a lack of long-term accountability. To address these issues, this research proposes two substantive recommendations.

First, this model should move beyond one-time compensation. Policy should encourage, or even mandate, equity-sharing models or long-term profit-sharing agreements. For instance, villagers could contribute their land quotas as equity in the development project, thereby receiving annual dividends. Furthermore, development contracts could be conditional upon the developer not only constructing in the resettlement area but also managing income-generating collective assets for the village for a predetermined period.

Second, the government should transition from a monopoly player to a market regulator. This involves developing standardized, plain-language contract templates to protect villagers from exploitative terms. Most crucially, authorities should establish a transparent, public online platform for quota listings and transactions. Such a platform would reduce information asymmetry, enable the villages to assess comparable prices, and allow the developers to discover projects more easily. This would foster genuine competition among buyers, rather than solely among sellers.

5.2.3. Policy Implication for Self-Organized TDR Projects

The core challenges for this model are high transaction costs, lack of capacity, and limited access to capital and information. To address these problems, this paper gives two solid policy recommendations.

First, to enhance the management capacity of village cadres and reduce policy information asymmetries, governments and NGOs may provide targeted, practical training programs for village leaders and collectives on project management, financial literacy, legal negotiation, and TDR regulations. This could be complemented with grant-funded technical assistance, providing access to lawyers, planners, and accountants who have a fiduciary duty to the collective, not to the government or a developer.

Second, instead of a uniform guaranteed price, a regionalized and tiered pricing mechanism for quotas should be implemented. Quotas from ecologically critical or remote areas might receive a premium subsidy from provincial/central coffers. This could help reduce the financial pressure of the grassroots program, particularly for underdeveloped rural areas having fewer resources.

5.3. Contribution and Limitation

This research makes theoretical and practical contributions to the understanding of TDR governance in developing contexts. Theoretically, it advances the field by developing an original analytical framework that synthesizes two established institutional approaches. Empirically, it provides robust evidence of governance model performance across diverse implementation contexts. The identification of specific institutional barriers to self-organization offers valuable insights for policymakers, while the nuanced recommendations for institutional reform suggest practical pathways for improving rural land development outcomes [52]. These findings have important implications for the ongoing evolution of China’s rural land policies [53,54,55,56] and may inform similar initiatives in other developing economies facing comparable challenges in balancing efficiency, equity, and participation in land governance.

However, the empirical findings primarily derive from evidence collected within Chengdu Municipality, which may limit their broader applicability to other regions of China. While these results offer valuable insights into TDR implementation within this specific context, their generalizability to other provinces requires verification through comparative studies conducted across diverse regional settings. To address this limitation, our research team has initiated an expanded investigation encompassing Chongqing Municipality, Hainan Province, Shaanxi Province, and Zhejiang Province. These comparative field studies have been carefully selected to represent varying levels of economic development, urbanization patterns, and land use characteristics. Through this expanded geographical scope, we aim to develop a more comprehensive and nuanced understanding of TDR implementation patterns across China’s diverse regional contexts.

6. Conclusions

This paper establishes an innovative analytical framework by integrating Ostrom’s Institutional Analysis and Development (IAD) framework with Williamson’s hierarchical institutional approach. This synthesized theoretical model enables a systematic examination of the complex interactions among stakeholders under different governance structures, the institutional rules that shape these interactions, and their ultimate impacts on transaction outcomes. By combining these two established theoretical perspectives, we developed a robust foundation for comparative institutional analysis that is particularly well-suited to China’s unique land governance context.

Applying this theoretical framework, the research conducted a comprehensive comparison of China’s three primary TDR governance models. The government-dominated approach demonstrates strengths in resource mobilization and project coordination but faces challenges in incorporating local knowledge and preferences due to its top-down implementation structure. The market-invested approach leverages private sector participation and capital, showing notable efficiency advantages in project execution, yet reveals inherent tensions between developer profit motives and equitable outcomes for rural communities. The self-organized approach emphasizes community participation and local empowerment, but our analysis identified significant capacity constraints that often hinder effective implementation.

Through an in-depth case study of a counterexample where collective interests were not adequately protected, the research revealed fundamental challenges facing self-organized governance structures. Village collectives frequently encounter substantial organizational obstacles, including limitations in project management expertise, financial administration capabilities, and technical implementation capacity. These operational challenges are compounded by persistent institutional constraints within China’s land governance system, which create disproportionate transaction costs for self-organized initiatives compared to other governance models. Our analysis suggests these structural barriers often undermine the theoretical advantages of self-organized approaches in practice.

Based on these findings, the study offers nuanced policy recommendations regarding rural land development approaches. While self-organized models hold theoretical promise for more participatory development, we recommend cautious and selective implementation. Successful implementation appears contingent on several key institutional preconditions: clear property rights delineation, comprehensive technical assistance programs, accessible financial support mechanisms, and sustained capacity-building initiatives. Furthermore, our research suggests that hybrid governance models, which strategically combine elements of self-organization with appropriate external support structures, may offer the optimal balance between local participation and professional implementation.

This study’s theoretical and empirical analysis yields three key findings regarding China’s TDR system. First, due to the program’s inherent complexity and substantial financial requirements for quota “production”, effective implementation requires leveraging complementary strengths from multiple stakeholders. Second, our examination of efficiency optimization reveals that transaction risks are the primary source of transaction costs as well as the central concern of all governance structures. These distinct governance modes have consequently emerged in different transactional contexts based on their comparative advantages in risk mitigation. While the de facto land development right has encouraged bottom-up participation in TDR projects, the persistent dual land system still poses some institutional barriers for potential project leaders—including both internal and external information asymmetries and opportunistic behaviors. Third, beyond governance structure selection, we find that local institutional innovations and collective action mechanisms can substantially enhance governance efficiency.

In summary, China’s TDR program offers valuable lessons for developing countries that are seeking to enhance urban–rural coordination. This program demonstrates the superiorities of governance diversity in aligning multiple stakeholder interests and adapting to diverse transaction contexts under the micro-level institutional environment. Moreover, this paper has also established precise governance–transaction alignment mechanisms and obtained some preliminary conclusions. However, due to the limitation of the case study methodology, these conclusions still need more data to support them in the next stage. For example, our working paper aims to explore the influential factors of institutional choice in China’s TDR projects, supported by 25% project data from Chengdu Municipality. Moreover, the actual impacts of TDR projects on rural development also need long-term observation, based on longitudinal quantitative data tracking or GIS databases for spatial analysis of long-term trends.