Since the 1980s, the property rights regime of China’s grasslands has been progressively reformed to stimulate the profitability of small farmers and the sustainable use of grasslands. After forty years, the practice of diversified local property rights system arrangements has been developed in the grasslands, with correspondingly different intensities of grassland utilization and livestock productivity. However, most academic and practical examinations have focused on community-owned grasslands, leaving the governance of the state-owned grassland understudied. In this study, an “Institutional Reliability of Natural Resource Governance” framework was developed and used to examine a state-owned farm in northern China as a case study, zooming into the nested “Employee Responsibility System” property right and its consequent impacts on tenure security and social identity, leading to changes in grassland use at both the individual household level and the collective level. Property rights insecurity and users’ identity dilemmas result in feedback of nonexcludability, increased cost, and adverse breeding structure, which jointly lead to environmental deterioration risk. Furthermore, laid-off employees’ collective action on utilizing common pastureland has come to fruition on resource conservation, and we found that elements such as common consensus, social capital, motivated authority, and rules-in-use help shape environmental conservation-oriented collective action. Our study introduces a previously unexplored nested property right regime incorporating an employee responsibility system in a state-owned farm. It emphasizes how property right and social identity jointly shape resource use at collective and individual household levels, ultimately influencing the sustainability of resource use.
