Does the “Three Rights Separation” System Improve the Economic Efficiency of Rural Residential Land Use?—Evidence from Yujiang and Deqing, China

The “three rights separation” system plays a vital role in enhancing the economic efficiency of rural residential land use, thereby contributing to land revitalization and rural-urban integration. Using survey data from 456 farmers in Yujiang District and Deqing County, this study employs DEA, Tobit, and threshold regression models to analyze the system’s effects. The results show that the system improves economic efficiency by approximately 8.9%, primarily by incentivizing investment and promoting land transfers. A nonlinear threshold effect exists: investment incentives become significant only when idle land exceeds 35 m2, consistent with farmers’ economic decision-making. Land transfers enhance efficiency via marginal return equalization, however, economies of scale are not evident, being constrained by legal and coordination factors. The findings highlight the importance of deepening reform implementation, enhancing farmers’ understanding of property rights, adopting differentiated incentives tailored to land size and farmer capacity, and regulating the land transfer market to ensure transparency and fairness. Furthermore, promoting collective or service-based management models can help overcome natural scale limitations, thereby unlocking the system’s full institutional dividends.