Citizen empowerment through land reform

This paper empirically investigates the interplay between de jure political institutions and de facto elite-versus-citizen political power in determining the likelihood of the adoption of pro-citizen or aggregate welfare-enhancing economic institutions. Our key innovation is to measure the elite vs. citizens’ de facto power by the stock of land reforms that have taken place up to a given year in a country during the period 1900 to 2010. Our empirical analysis documents that, controlling for permanent country differences, common time shocks and country-specific time trends, and addressing the biases owing to initial differences in land distribution and time-varying omitted variables, democratization correlates with a relatively more likely movement towards aggregate welfare-maximizing policies in countries where adequate citizen power has been built (elite power has been adequately destroyed) over time. In addition, each land reform, which is an incremental destruction of the elite power, is associated with a relatively more likely movement towards aggregate welfare-enhancing policies in countries under democratic regimes, compared to autocracies.