Dietrich Vollrath

Land Distribution and International Agricultural Productivity

The unequal distribution of agricultural land is often cited as a source of inefficiency in agriculture. Previous cross-country studies of agricultural productivity differences, though, have not considered land inequality. This article addresses this issue by using cross-country data on inequality in operational holdings of agricultural land from Deininger and Squire (1998). In an estimation of an agricultural production function, the Gini coefficient for land holdings is found to have a significant negative relationship with productivity. This is consistent with the existence of heterogeneity in productivity by farm size within countries. A one standard deviation drop in the Gini coefficient implies an increase in productivity of 8.5%.

Dimensions of Land Inequality and Economic Development

There are several theories linking land inequality with aspects of economic development. Empirical work on these theories has attempted to establish a relationship between land inequality and institutions, financial development, and education. This research, though, has relied on measures of land inequality that capture only inequality within the class of landholders, ignoring completely the issue of landlessness. This omission raises suspicion about the usefulness of those empirical results. We use a new measure of the breadth of landholdings across the agricultural population to address this issue. We test the proposed relationships regarding land inequality and development using the new measure. The regressions fail to find significant and robust relationships between land inequality of either type and institutions or financial development. We do find that lower land inequality across agricultural populations, but not inequality within the landholding class, is associated with greater public provision of education.

Land Distribution and Financial System Development

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.

Measuring Aggregate Agricultural Labor Effort in Dual Economies

Wide differences in labor productivity are observed between agriculture and industry in most developing countries. Research suggests that these differences - often denoted a “dual economy” effect — can explain a significant portion of low output per capita levels in these countries. A central input to the labor productivity calculation is the aggregate labor effort in the agricultural sector. Using findings from the Rural Income Generating Activity (RIGA) database, I reconsider the measure of labor productivity in agriculture and industry. I use several methods to extract information on labor effort and human capital from the household data in RIGA, and this is used to estimate the aggregate labor effort in the agricultural sector. With these new estimates, dual economy effects are found to be less severe for most of the RIGA countries. Using these estimates to adjust a wider sample of country-level data shows that the share of variation in output per capita explained by dual economy effects is around half of previous estimates.

Geography and the Determinants of Land Distribution: Evidence from the United States

While the adverse impacts of land inequality have often been documented, the origins of this inequality are less commonly discussed. One hypothesis, most recently associated with the work of Engerman and Sokoloff, holds that the type of crops available for production dictated the initial land distribution within economies. However, this hypothesis has not received careful empirical attention and the possibility that land distributions influence the type of crops produced makes causal inference difficult. This paper uses county level data from the 1860 Agricultural Census of the United States to identify the causal role of crop type on land distribution. Identification is obtained by using several county level geographic variables as instruments for the type of crops planted within a county. The results show that the percentage of output made up of cash crops (cotton, sugar, and tobacco) was highly significant in determining land inequality across U.S. counties in 1860. Geography, acting indirectly through its influence on crop type, had a significant impact on land inequality. This supports the general hypothesis that geography affects economic development indirectly through institutions. However, it provides a much more specific example of the role of geography in development than previously identified.