The Effects of Improved Land Rights on Land Markets, Land Use Efficiency, Employment and Household Welfare: Evidence from the 2013 Vietnam Land Law
Tram Hoang, Songqing Jin, Klaus Deininger, Hai-Anh Dang
This paper investigates the impact of increased tenure security on land transactions and the ensuing productive efficiency, as well as its spillover effects on the labor market and overall household welfare. Vietnam’s 2013 Land Law, which extends the lease term for usufruct rights for annual land from 20 years to 50 years, provides the opportunity for difference-in-differences (DID) identification. This involves the first difference between annual land and perennial land, and the second difference between before and after the law was passed, to study the effect of increased land security. Plot-level data are available for the land transfer outcomes (lease out, lease in, sold, purchased). For the welfare outcomes, the impacts of the land law are estimated at the household level. Household outcomes include the household’s food expenditure per capita as well as indicator variables regarding labor (wage labor, nonfarm wage labor, wage labor in agriculture, wage labor in commune, wage labor in province, and wage labor outside of province), and whether households have their own business. Plot-level DID results reveal that annual plots are 3 (or 6) percentage points more likely to be leased out (or sold) as a consequence of the law, while there is no significant effect on the likelihood of annual plots being leased in or purchased. This result is in line with the expectation that the heightened security generated by the law is a supply factor affecting the supply of land. As both rental and sale markets are found to transfer land from less productive to more productive farmers, the more active land markets incentivized by the law are expected to enhance land use efficiency. Household-level analysis shows that the passage of the law is associated with a shift from self-employed farm work to wage employment, especially agriculture-related wage work that is closer to home. Household food expenditures per capita are also found to increase due to the law. Given these findings, the study suggests that the law can be a low-cost tool in increasing land market participation with some effects on the labor market and improving welfare.
Event: World Bank Land Conference 2024 - Washington
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