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This paper establishes a three-sector general equilibrium model to explore how rural property rights influence urban unemployment, skilled-unskilled wage inequality and social welfare in developing countries. Strengthened rural property rights generate the rent-gaining effect and the productivity-enhancing effect, and the interaction of these two effects determines the changes of urban unemployment, skilled-unskilled wage inequality and social welfare. In addition to the aforementioned two effects, the agricultural sector’s wage elasticity of unskilled labor demand also matters for the change of wage inequality.

The Impacts of Rural Property Rights on Urban Unemployment, Wage Inequality, and Welfare in Developing Countries