1 Applied Economics 8703: Lecture 5 Rural Land Markets in Developing Countries (Part II) Theoretical models of sharecropping and other issues concerning land markets in developing countries will probably never settle arguments about the nature of land markets and the consequences of specific policies on land markets and household welfare. Careful empirical studies are needed to determine which theories are credible, and the impact of specific policies. This lecture examines three recent studies, two for India and one for China. I. Land Reform, Poverty and Economic Growth in India (Besley and Burgess, 2000) Lecture 4 stated that land redistributions (reforms) are rare, and the most comprehensive ones were the outcomes of some group or countries losing a war. Yet many Indian states have, at least on paper, implemented large land reforms. Besley and Burgess examine whether these policies have had effects on poverty and on economic growth. The economic growth issue is important, because if a redistributive policy is accompanied by inefficiencies, then poverty reductions in the short run could be followed by
2 increased poverty in the long-run (relative to the policy not being adopted) because of reduced economic growth. In India (and elsewhere) there is an additional question about land reforms, which is whether they even reduce poverty in the short-run because they are implemented in a way that favors politically powerful groups. In India, the 1949 Constitution grants each state the power to implement (or not implement) land reforms. It is useful to divide land reform legislation into four categories: 1. Tenancy reform: regulation of tenancy contracts (e.g. rules about what shares in share-cropping agreements are legal) and attempts to abolish tenancy and give the land to the tenants. 2. Abolishment of intermediaries: forbid land- owners to hire people to collect rent for them. 3. Ceilings on landholdings (maximum limit on how much land one person can own). 4. Incentives to consolidate scattered landholdings (motivated by efficiency, not poverty reduction).
3 The intermediaries were agents of supporters of British colonial rule, and no one liked them once the British were gone, so legislation of the second type was achieved quickly and effectively. However, many state legislatures were dominated by landlords, who blocked efforts to establish land ceilings (through loopholes they could give title to plots of land to other family members or to friends) and to implement tenancy reforms. Overall, it is far from clear that land reform legislation has helped poor people in much of India. In some cases, it probably made things worse because legislation to require land owners to give the land they are renting out to the renters resulted in landowners not renting any of their land out (presumably they shifted to hiring landless people as wage laborers, which could be much more inefficient).
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