Tillers of Prosperity: Land Ownership, Reallocation, and Structural Transformation

This paper analyzes the role of property rights and agricultural technology in factor reallocation and structural transformation. Using a novel dataset, I show that the land reform enforced by the Allies after World War II, which redistributed the ownership of farmlands from landlords to tenants and promoted equality, led farmers to use more low-cost agricultural machines when they became available and to rely less on family labor for production, resulting in an increase in the outmigration of farmers' children from rural to urban areas and an increase in agricultural income. Then, I quantify the impact of the factor reallocation on the entire economy using a two-sector neoclassical growth model, and find that (a) both labor and capital reallocation affected economic growth, and (b) the standard of living during the postwar period was significantly lower without such reallocation. These results indicate that not only labor, but also capital, including agricultural machines, is an important factor for structural transformation, and that property rights play a vital role in this process.