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Land Distribution and Financial System Development

  • Dietrich Vollrath
  • Lennart Erickson

Research on credit markets from developing economies, as well as work on the origin of institutions in general, has suggested that land inequality may play a role in determining financial development. In this paper we establish empirically that initial land inequality is a significant predictor of financial depth across countries, even while controlling for other predictors such as legal origin, ethnic fractionalization, and income inequality. To examine this relationship we have created a new measure of land distribution within countries that builds upon the work of Deininger and Squire (1998) by explicitly accounting for landlessness. In addition to being a significant predictor of financial development, land inequality is found to be uncorrelated with other fundamental characteristics of economies, suggesting its possible use in a wider range of research.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/83.

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Length: 30
Date of creation: 01 Apr 2007
Date of revision:
Handle: RePEc:imf:imfwpa:07/83
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  1. Lennart Erickson & Dietrich Vollrath, 2004. "Dimensions of Land Inequality and Economic Development," IMF Working Papers 04/158, International Monetary Fund.
  2. Oded Galor & Omer Moav & Dietrich Vollrath, 2004. "Land Inequality and the Origin of Divergence and Overtaking in the Growth Process," GE, Growth, Math methods 0410004, EconWPA.
  3. Galor, Oded & Moav, Omer & Vollrath, Dietrich, 2003. "Land Inequality and the Origin of Divergence and Overtaking in the Growth Process: Theory and Evidence," CEPR Discussion Papers 3817, C.E.P.R. Discussion Papers.
  4. RAFAEL LaPORTA & FLORENCIO LOPEZ-de-SILANES & ANDREI SHLEIFER & ROBERT W. VISHNY, . "Legal Determinants of External Finance,"," CRSP working papers 324, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  5. Beck, Thorsten & Levine, Ross & Loayza, Norman, 2000. "Finance and the sources of growth," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 261-300.
  6. Binswanger, Hans P. & Deininger, Klaus & Feder, Gershon, 1995. "Power, distortions, revolt and reform in agricultural land relations," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 42, pages 2659-2772 Elsevier.
  7. Otsuka, Keijiro, 1991. "Determinants and consequences of land reform implementation in the Philippines," Journal of Development Economics, Elsevier, vol. 35(2), pages 339-355, April.
  8. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
  9. Ross Levine & Sara Zervos, . "Stock markets, banks and economic growth ," CERF Discussion Paper Series 95-11, Economics and Finance Section, School of Social Sciences, Brunel University.
  10. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  11. Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Aggregating governance indicators," Policy Research Working Paper Series 2195, The World Bank.
  12. Abhijit Banerjee & Lakshmi Iyer, 2005. "History, Institutions, and Economic Performance: The Legacy of Colonial Land Tenure Systems in India," American Economic Review, American Economic Association, vol. 95(4), pages 1190-1213, September.
  13. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
  14. Levine, Ross, 2005. "Finance and Growth: Theory and Evidence," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 12, pages 865-934 Elsevier.
  15. Thorsten Beck & Ross Levine & Norman Loayza, 1999. "Financial Intermediation and Growth: Causality and Causes," Working Papers Central Bank of Chile 56, Central Bank of Chile.
  16. Dietrich Vollrath, 2007. "Land Distribution and International Agricultural Productivity," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(1), pages 202-216.
  17. repec:ner:tilbur:urn:nbn:nl:ui:12-3125520 is not listed on IDEAS
  18. Timothy Besley & Robin Burgess, 1998. "Land reform, poverty reduction and growth : evidence from India," LSE Research Online Documents on Economics 2018, London School of Economics and Political Science, LSE Library.
  19. repec:fth:wobaco:1083 is not listed on IDEAS
  20. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
  21. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 717-37, August.
  22. Shankha Chakraborty & Tridip Ray, 2003. "The Development and Structure of Financial Systems," University of Oregon Economics Department Working Papers 2003-2, University of Oregon Economics Department, revised 01 Dec 2003.
  23. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
  24. Bell, Clive, 1988. "Credit markets and interlinked transactions," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 16, pages 763-830 Elsevier.
  25. repec:ner:tilbur:urn:nbn:nl:ui:12-3125519 is not listed on IDEAS
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