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Land Ceiling Legislations, Land Acquisition and De-industrialisation: Theory and Evidence from the Indian States

Author

Listed:
  • Pal, Sarmistha

    (University of Surrey)

  • Chowdhury, Prabal Roy

    (Indian Statistical Institute)

  • Saher, Zoya

    (University of Nottingham)

Abstract

We examine the impact of legislated land ceiling size on capital investment and industrialisation in the Indian states. India's land ceiling legislations of 1960s and 1970s imposed a ceiling on maximum land holdings and redistributed above-ceiling lands. These ceiling legislations, effectively implemented or not, had increased land fragmentation and increased transactions costs of acquiring land for both strategic and non-strategic reasons. States with smaller ceiling size are thus likely to have (i) lower capital investment; (ii) less factories and lower industrialisation too. Ceteris paribus, estimates of both relative (post-1971 ceiling legislations relative to pre-1971 ones) and aggregate effects of legislated ceiling size lend support to these hypotheses, after eliminating competing explanations. These results offer insights about how to reduce transactions costs of land acquisition, policies that we claim are also applicable beyond India.

Suggested Citation

  • Pal, Sarmistha & Chowdhury, Prabal Roy & Saher, Zoya, 2021. "Land Ceiling Legislations, Land Acquisition and De-industrialisation: Theory and Evidence from the Indian States," IZA Discussion Papers 14624, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp14624
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    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment

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