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Land Reform and Productivity: A Quantitative Analysis with Micro Data

  • Tasso Adamopoulos
  • Diego Restuccia

We assess the effects of a major land-policy change on farm size and agricultural productivity using a quantitative model and micro-level data. We study the 1988 land reform in the Philippines that imposed a ceiling on land holdings and severely restricted the transferability of the redistributed farm lands. We study this reform in the context of an industry model of agriculture with a non-degenerate distribution of farm sizes featuring an occupation decision and a technology choice of farm operators. In this model, a land reform reduces agricultural productivity not only by reallocating resources from large/high productivity farms to existing small/low productivity farms (misallocation effect), but also by distorting farmers' occupation and technology adoption decisions (selection effect). The model, calibrated to pre-reform farm-level data in the Philippines, implies that on impact the land reform reduces average farm size by 34 percent and agricultural productivity by 17 percent. The government assignment of land and the ban on its transfer are key for the magnitude of the results since a market allocation of the above-ceiling land produces only 1/3 of the size and productivity effects. These results emphasize the potential role of land market efficiency for misallocation and productivity in the agricultural sector.

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Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-509.

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Length: Unknown pages
Date of creation: 04 Apr 2014
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Handle: RePEc:tor:tecipa:tecipa-509
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  1. Lucia Foster & John Haltiwanger & Chad Syverson, 2005. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," Working Papers 05-11, Center for Economic Studies, U.S. Census Bureau.
  2. Douglas Gollin & David Lagakos & Michael E. Waugh, 2014. "Agricultural Productivity Differences across Countries," American Economic Review, American Economic Association, vol. 104(5), pages 165-70, May.
  3. Chang, Tai Hsieh & Peter, J- Klenow, 2007. "Misallocation and manufacturing TFP in China and India," MPRA Paper 35084, University Library of Munich, Germany, revised 15 Jun 2007.
  4. Hans P. Binswanger-Mkhize & Camille Bourguignon & Rogier van den Brink, 2009. "Agricultural Land Redistribution : Toward Greater Consensus," World Bank Publications, The World Bank, number 2653.
  5. Diego Restuccia & Dennis Tao Yang & Xiaodong Zhu, 2003. "Agriculture and Aggregate Productivity: A Quantitative Cross-Country Analysis," Working Papers diegor-03-01, University of Toronto, Department of Economics.
  6. Virgiliu Midrigan & Daniel Yi Xu, 2014. "Finance and Misallocation: Evidence from Plant-Level Data," American Economic Review, American Economic Association, vol. 104(2), pages 422-58, February.
  7. Richard Rogerson & Diego Restuccia, 2004. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," 2004 Meeting Papers 69, Society for Economic Dynamics.
  8. 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.
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  10. Adriano, Lourdes S., 1991. "A General Assessment of the Comprehensive Agrarian Reform Program," Working Papers WP 1991-13, Philippine Institute for Development Studies.
  11. Tasso Adamopoulos & Diego Restuccia, 2013. "The Size Distribution of Farms and International Productivity Differences," Working Papers tecipa-494, University of Toronto, Department of Economics.
  12. Xu Yi & Nezih Guner & Gustavo Ventura, 2005. "Macroeconomic Implications of Size Dependent Policies," 2005 Meeting Papers 530, Society for Economic Dynamics.
  13. Pranab Bardhan & Dilip Mookherjee, 2007. "Land Reform And Farm Productivity In West Bengal," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-163, Boston University - Department of Economics.
  14. Mariapia Mendola & Franklin Simtowe, 2014. "The Welfare Impact of Land Redistribution: Evidence from a Quasi-Experimental Initiative in Malawi," Development Working Papers 366, Centro Studi Luca d\'Agliano, University of Milano, revised 07 Apr 2014.
  15. Carter, Michael R, 1984. "Identification of the Inverse Relationship between Farm Size and Productivity: An Empirical Analysis of Peasant Agricultural Production," Oxford Economic Papers, Oxford University Press, vol. 36(1), pages 131-45, March.
  16. Maitreesh Ghatak & Sanchari Roy, 2007. "Land reform and agricultural productivity in India: a review of the evidence," Oxford Review of Economic Policy, Oxford University Press, vol. 23(2), pages 251-269, Summer.
  17. Yongseok Shin & Joe Kaboski & Francisco J. Buera, 2008. "Finance and Development: A Tale of Two Sectors," 2008 Meeting Papers 955, Society for Economic Dynamics.
  18. David Lagakos & Michael E. Waugh, 2013. "Selection, Agriculture, and Cross-Country Productivity Differences," American Economic Review, American Economic Association, vol. 103(2), pages 948-80, April.
  19. Gollin, Douglas & Parente, Stephen L. & Rogerson, Richard, 2000. "Farm Work, Home Work And International Productivity Differences," 2000 Annual meeting, July 30-August 2, Tampa, FL 21797, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  20. Michael Maio & James Schmitz & Arilton Teixeira & Benjamin Bridgman, 2011. "Why Has Puerto Rico Performed So Poorly? Lessons from its Sugar Manufacturing Industry," 2011 Meeting Papers 1048, Society for Economic Dynamics.
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  24. Oded Galor & Omer Moav & Dietrich Vollrath, 2009. "Inequality in Landownership, the Emergence of Human-Capital Promoting Institutions, and the Great Divergence," Review of Economic Studies, Oxford University Press, vol. 76(1), pages 143-179.
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  28. repec:oup:qjecon:v:129:y:2014:i:2:p:939-993. is not listed on IDEAS
  29. Deininger, Klaus & Feder, Gershon, 1998. "Land institutions and land markets," Policy Research Working Paper Series 2014, The World Bank.
  30. Saturnino M. Borras, 2003. "Inclusion-exclusion in public policies and policy analyses: the case of Philippine land reform, 1972-2002," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(8), pages 1049-1065.
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