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AbstractLand pawning is considered inefficient because it causes property rights to be unclearly delineated. Despite this, it once prevailed worldwide. We propose that this system flourished when state capacity was weak and the private sector spontaneously managed public affairs. Local collaboration made it difficult to sell land outright to an outsider who might be an unreliable collaborator. Land pawning granted the pawner's family and neighbours a 'probation' period to observe the pawnee's behaviour. If they found the pawnee irresponsible, they could still redeem the land. Data compiled from contracts in Qing Taiwan support our hypothesis.