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General equilibrium effects of land market restrictions on labor market : evidence from wages in Sri Lanka

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  • Emran, M. Shahe
  • Shilpi, Forhad

Abstract

Taking advantage of a historical quasi-experiment in Sri Lanka, this paper provides evidence on the effects of land market restrictions on wages and its spatial pattern. The empirical specification is derived from a general equilibrium model that predicts that the adverse effects of land market restrictions on wages will be less in remote locations. For identification, the study exploits the effects of historical malaria prevalence on the incidence of land restrictions through its effects on"crown land". During the 16th to early 20th centuries, areas severely affected by malaria were abandoned by households and the land was taken over by the government. These lands that were later distributed through resettlement programs are subject to sales, rental, and mortgage restrictions. The variations in the amount of crown land resulting from different intensity of historical malaria provide a source of exogenous variations in the incidence of land restrictions in a sub-district. The results show that land restrictions reduce wages substantially, and this effect is smaller in remote locations. A 1 percent increase in land restrictions reduces wages by about 6.6 percent at the median travel time from an urban center, and the effect becomes effectively zero after 6 hours of travel time.

Suggested Citation

  • Emran, M. Shahe & Shilpi, Forhad, 2010. "General equilibrium effects of land market restrictions on labor market : evidence from wages in Sri Lanka," Policy Research Working Paper Series 5461, The World Bank.
    • Handle: RePEc:wbk:wbrwps:5461
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    References listed on IDEAS

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    1. Jonathan Temple & Ludger Wößmann, 2006. "Dualism and cross-country growth regressions," Journal of Economic Growth, Springer, vol. 11(3), pages 187-228, September.
    2. Vollrath, Dietrich, 2009. "How important are dual economy effects for aggregate productivity?," Journal of Development Economics, Elsevier, vol. 88(2), pages 325-334, March.
    3. Tao Yang, Dennis, 1997. "China's land arrangements and rural labor mobility," China Economic Review, Elsevier, vol. 8(2), pages 101-115.
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    Cited by:

    1. Chankrajang, Thanyaporn, 2012. "The Effects of Rural Land Right Security on Labour Structural Transformation and Urbanization: Evidence from Thailand," WIDER Working Paper Series 041, World Institute for Development Economic Research (UNU-WIDER).
    2. M. Shahe Emran & Forhad Shilpi, 2017. "Land Market Restrictions, Women's Labour Force Participation and Wages in a Rural Economy," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(5), pages 747-768, October.
    3. repec:unu:wpaper:wp2012-41 is not listed on IDEAS
    4. Thanyaporn Chankrajang, 2012. "The Effects of Rural Land Right Security on Labour Structural Transformation and Urbanization: Evidence from Thailand," WIDER Working Paper Series wp-2012-041, World Institute for Development Economic Research (UNU-WIDER).

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