Land transfer distortion and overeducation during China’s transition period

Land transfer distortion remains a critical institutional factor in China’s economic landscape, but its impact on labor market efficiency, particularly overeducation, is under-explored. This paper empirically examines the association between land transfer distortion and overeducation using a multilevel linear model (HLM) and combined micro and macroeconomic data from the 2020 China Family Panel Studies (CFPS). There are three main findings: (1) Land transfer distortion has a statistically significant positive relationship with the probability of individual overeducation. (2) Overeducation exhibits significant heterogeneity across enterprise ownership types, with State-owned Enterprises (SOEs) showing the highest probability. (3) The correlation between land transfer distortion and overeducation is strongest in SOEs, weaker in private enterprises, and statistically insignificant in foreign-invested enterprises. These findings suggest that optimizing human capital allocation in transition economies requires fundamental market-oriented reforms in land resource distribution to align industrial structures with educational attainment.