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Land reform in India

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Ayman El Dahrawy

on 26 April 2013

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Transcript of Land reform in India

Introduction Land Reform and Poverty Reduction Land reform and Wages Land reform and Growth Land reform and inequality Robustness Endogeneity Results from instrumental variables Basic Results Background and Data Land Reform, Poverty Reduction and Growth Agricultural wages of laborers are a robust indicator of the welfare of landless laborers who comprise a significant fraction of the poor in India (World Bank 1997). Unable to
distinguish if land reforms were implemented Reforms take time to produce an effect . Shocks to poverty may be correlated with land reforms Land taxes+agricultural income taxes+property taxes Link between land reform and :
poverty reduction (main focus)
economic growth This paper studies land reform as a redistributive policy Land Reform,
Poverty Reduction and
Growth : Evidence from India The impact of redistributive policies on economic growth is a very controversial subject India is an important case of land
reform Data : 16 main Indian states from
1958 to 1992 1949 : Indian Constitution : states are granted the power to enact land reforms
4 types of land reform :
- Tenancy reform
- Abolition of intermediaries
- Land ceiling
- Land consolidation Background Data Difficulty of Implementation of land reforms Abolition of intermediaries : early implementation
Tenancy reform : much less pronounced
Land ceiling : political failure
Land consolidation : the less enacted, patchy Data Poverty impact of the reforms : village level study Abolition of intermediaries : limited and variable success
Tenancy reform : success only where tenants were well organized
Land ceiling : neutral or negative effects
Land consolidation : no redistributive impact Data Data Study in the context of a significant overall reduction in poverty throughout the data period
all-India rural headcount measure has fallen from 55% to 40%
rural poverty gap from 19% to 10% Data The paper also looks at :

Agricultural wage data
Public finance data
- development expenditure
- total state taxes
- state redistributive taxes per capita
Population estimates from the censures for 1951, 1961, 1971, 1981 and 1991 Data To examine the determinants of growth :
Agricultural state domestic product : deflated using the Consumer Price Index for Agricultural Laborers
Nonagricultural state domestic product : deflated using the Consumer Price Index for Industrial Workers
Combined state domestic product
as real values per capita

Agricultural yields : measured by real agricultural state domestic product divided by the net sown area Making Sense of the Results The empirical analysis suggests that poverty reduction is mainly due to : Abolition of intermediaries
Tenancy reforms But this analysis has limited the role of land redistribution and doesn't cover some evidence of general equilibrium : Theoretical Analysis 2 theoretical models :
Labor supply model
Agricultural contracting model The Model of Labor Supply 3 groups of individuals: Landlords : demand labor
Tenants : supply labor
Landless laborers : supply labor
The poor are predominant on the latter 2 groups The Model of Labor Supply 1.Land reform more implemented where poverty is highest.
2.Responsiveness to land reform is greater where poverty is highest. An individual with nonlabor income x, preferences u(.)-phi(.) has an optimal labor supply of : where w is the agricultural wage
x represents the value of the tenancy for tenants and 0 for landless laborers.

Labor supply is decreasing in x ==> As the value of tenancy increases as a result of land reform, we would expect tenants to reduce labor supply to the market The Model of Agricultural Contracting R(e) output of a given piece of land under tenancy where e is the effort applied to the land by the tenant.
Tenants need to be monitored in order to put in effort in land : we suppose a contract that specifies an effort level e
The tenant can "shirk", risking to be fired with probability p and becoming a landless laborer with payoff v(0,w) The Model of Agricultural contracting Land Reform, Poverty Reduction and Growth : Evidence from India State domestic product/net sown area Tenancy reforms Poverty Outpout per capita Land consolidation Poverty Outpout per capita Abolition of intermediaries Poverty Outpout per capita Ceilings on landholdings Poverty Outpout per capita (Not seriously implemented) Expected Results Impact on poverty comes from reforms affecting production relations, not land distribution¡ 1953/54 1982 Land gini high reform Land gini low reform Landless high reform Landless low reform 0.686 0.669 0.653 0.643 14.97% 12.03% 12.4% 10.91% 0.017 0.01 2.94% 1.49% Robust link between land reform and poverty reduction in particular those which change the terms of land contract
Frequently found inverse relationship between farm size and productivity The effort put by the tenant increases in p
The tenant's equilibrium payoff is : Then Land reform=>more secure right to the land=>p falls The tenant will benefit this reform if Higher tenure security=>tenants reduce their labor supply=>increase in agricultural wages The Agricultural Framework Applied to the Cases of Abolition of Intermediaries 3 parties :
A tenant
A landlord
An intermediary : very strong bargaining position over the landlord and the tenant The intermediary captured the surplus from the land
After the intermediary is abolished, the surplus is now available (p remains the same)
If the tenant has a bargaining power with his landlord =>tenant's payoff rises=>higher agricultural wages The Agricultural Framework Applied to the Case of Tenancy Reform We suppose that the landlord has all the bargaining power
Tenancy reform=>more difficult for landlord to evict tenants if they shirk<=>fall in p
Two effects :
Effort falls=>output falls
The tenant's rent go up=>higher agricultural wages Conclusion Robust evidence of a link between poverty reduction and
tenancy reform
abolition of intermediaries Land reform can benefit the landless by raising agricultural wages Conclusion Conclusion Some important numbers The authors find that a reduction of the all-India poverty gap of 1% can be explained by land reform or 10% of the actual reduction in poverty over the period of the data
Comparing the effect of land reform on poverty with the effects of changes in per capita income
=>Implementing a land reform has similar effect on poverty reduction to a 10% increase in per capita income, or around 4-5 years growth at the all-India average growth rate over this period. Personal Opinion The UN estimates that the proportion of people with insufficient nutrition was 1 billion in 2009.
37% of the world population (2012) depends on agriculture Pros :
Limited rigorous quantitative analysis of effectiveness
Robust estimation methods Cons :
Lack of consistency on the methods used.
Simplicity of the theoretical models.
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