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The purpose of this paper is to examine the effect of perceived land tenure security in China on farmers' decisions to invest in relatively long‐term land quality improvement measures, taking into account the potential endogeneity of tenure security.

Data from a survey held in 2008 and 2010 among 259 households in Minle County, Gansu province, covering the years 2007 and 2009, are used to estimate the factors affecting land levelling investments, irrigation canal investments and perceived land tenure security. The authors use the 2SCML technique and the IVLS method to estimate a selection model and a non‐limited regression model, respectively, and use IVP methods to examine the robustness of the results.

The authors' results indicate that perceived land tenure security significantly affects self‐governed investments but does not affect individual investments in land quality improvements. In particular, the authors find that households that consider land certificates as important for protecting land rights invest significantly more in irrigation canals construction and maintenance. The authors' results further provide evidence that individual investments in land quality improvement contribute to higher perceived land tenure security.

The paper contributes to the available literature on the relationship between land tenure security and land investments by examining the role of perceived (instead of formal) land tenure security and by making a distinction between individual household investments and self‐governed land investments. The authors' results provide an explanation for the phenomenon that land readjustments still take place in some parts of China, but not in others.