If any body has been even near CESP, JNU, he or she cannot miss one simple prognosis for almost all of India’s economic ills- lack of land reforms! I think Tim Besley & Robin Burgess definitely did not miss it. In a very interesting article, they undertake the task of econometrically investigating the relationship between land reforms, poverty and growth in India. They find a robust link between land reform and poverty reduction. However, they argue that a closer scrutiny reveals that, in an Indian context, this is due primarily to land reforms that change the terms of land contracts rather than actually redistributing land.
Some points worth noting:
- In an IV regression, they find that Congress and soft left decrease the probability of enacting land reform legislation, while hard left exerts a positive influence and Hindu parties are insignificant. If you think this is a cudos for left governments, note that the overall positive influence of hard left parties seems to originate principally through strong positive effect on the passage of land ceiling legislation and the authors do not find any evidence that such land reforms reduce poverty.
- Land reforms have a positive significant effect on agricultural wages, though this effect primarily comes from abolition of intermediaries.
- Tenancy reform has negative impact on agricultural output while land consolidation has the opposite effect.
Thus, according to the authors, although the effects on poverty are likely to have been greater if large scale redistribution of land had been achieved, the results are interesting as they suggest that partial, second best reforms which mainly affect production relations in agriculture can play a significant role in reducing rural poverty. Comparing the effect of land reforms on poverty with effect of changes in per capita income, the authors find that implementing a land reform has a similar effect on poverty reduction to a 10 percent increase in per capita income, or around four to five years growth at all-India average growth rate over period (1958-1992).
The article also has a good summary of the kind of land reforms undertaken by various states till now.
Besley Timothy & Burgess Robin (2000), Land Reform, Poverty Reduction, and Growth: Evidence from India, The Quarterly Journal of Economics, May.