Sunday, March 04, 2007

Land Reform, Inequality and Economic Growth

To the extent that land reform is able to lead to greater equality in terms of ownership of land, the prospects for economic growth will improve.

From "The Mystery of Economic Growth" by Elhann Helpman (p. 92):

"Alesina and Rodrik* found a significant negative effect of the Gini coefficient of the distribution of income on the growth rate. But they also found that this effect becomes insignificant when the Gini coefficient of the distribution of land ownership is also included as an explanatory variable. In other words, inequality in the ownership of land not only is more important for explaining growth than inequality in the distribution of income, it also turns the distribution income into an inconsequential factor. This finding has been corroborated by Deininger and Squire**"

*Alesina, Alberto and Dani Rodrik. 1994 "Distribution Politics and Economic Growth" Quarterly Journal of Economics 109: 465-490

**Deininger, Klaus and Lyn Squire. 1998 "New Ways of Looking at Old Issues: Inequality and Growth" Journal of Development Economics 57: 259-287


mschumey07 said...

My family had given away a small parcel of land. It has quite a number of mango trees. Informal settlers soon occupied it. My parents allowed them to use and benefit from that piece of land. They in turn gave as 2 baskets of mangoes whenever we visit the place. We never got any monetary remuneration from the.

We still pay for the real estate tax up to now. The initial 10 families had grown to 15 as their kids began to have their own families. In the 40 years they've been there, their children were able to finish college. This was made possible through the "fruits" of their labor.

We are not well off but my parents believe that given a fighting chance, the poor can be productive and will use their blessings wisely. I am appalled by how some of the rich continue to resist land reform and by how our legislators would want to allow foreign ownership of land. They should make it their advocacy to make sure each and every Filipino family have their own land before giving aliens our lands. Social justice for the Filipinos first.

cvj said...

Hi Schumey, good to hear about what you parents have done. If their actions were replicated especially by those who own the most land, then everyone would have ended up better off and the CPP/NPA insurgency would not have gotten off the ground in the first place. Would you know what motivated them to do such a thing? I mean why, unlike the others, would they care to give the poor a 'fighting chance'?

mschumey07 said...


They always believed that for one to progressive, those around the should be progressive too. We are in this economic rut because people only think of themselves. Just imagine if all the Filipinos are productive? Can you imagine how huge our economy would be? Its lonely to be on top alone, its happier if everyone is there to share your happiness with you.

cvj said...

Thanks Schumey. I wonder what proportion of our countrymen share your parent's outlook. To the extent the people do so, the odds of us emerging out of this situation will be higher.

sparks said...

Land reform was key to South Korea's rapid economic growth from the 60s to 70s. By the end of the 19th century their aristocracy had lost power (due to what exactly I forget!). And the 2nd World and Korean wars just sort of wiped the slate clean. So when dictator General Park Chung Hee took over he didn't have large landed elites to battle with.

According to political economists who compare Latin America (under ISI) and East Asia (under EOI), the difference between the two was in the former, there didn't grow a viable domestic market to consume the locally manufactured goods. The locals just didn't have enough spending power. Whereas in the latter, under very tight state supervision and protectionism, new industries formed, the domestic market was able to grow along with them, and when the industries were strong enough to compete, they ventured into exports.

Of course we can all argue that all this happened under US and Japanese protection because of the Cold War (And S.Korea being an important front in US containment policy). So it is arguable whether something like this could happen again for a small country.

Anomalous so far is China. In the next 20 years, what happens over there should be interesting to watch and maybe, learn from.

cvj said...

Sparks, thanks for your comment. Could it be the 50-year Japanese occupation of the peninsula which led to the Korean landed aristocracy losing power?

I am currently in the middle of Alice H. Amsden's "The Rise of 'The Rest'" which chronicles the industrial development models of countries such as Korea, Taiwan, India and China on the one hand and Latin America (and Turkey) on the other. The former adopted an "independent" approach while the latter an "integrationist" approach. (I'll blog about this when i'm through reading.)

Related to this thread, the book observes that Korea and Taiwan inherited farmlands and a functional banking system from Japan that was kept securely in state hands at least through the 1980s.

As for China, i don't think it's anomalous in the sense that Mao's revolution in 1949 also 'wiped the slate clean' in terms of land inequality and paved the way for Deng's reforms.