Towns and Rural Land Inequality in India
Manaswini Rao, Juan Eberhard, Prashant Bharadwaj
Using the universe of land records from a large state in India, we document three empirical facts on rural land holding inequality at the village-level: 1) inequality is higher close to urban areas and decreases with distance, 2) this is due to fewer medium sized farms (i.e. more small and large farms near urban areas), and 3) the distance to urban area-land holding inequality relationship depends on the size of the urban area - larger the urban area, greater the inequality close to such towns. A parsimonious model where individual farmers face a U-shaped agriculture production function between land size and farm productivity, bequest considerations of their land among their children, and a significant urban opportunity cost of farm production, explains these patterns. These three features are key to explaining some distinct features of developing economies: the preponderance of small farms, the large concentration of land transactions that happen within families, and the role that urban opportunities play in shaping land transactions.
Event: World Bank Land Conference 2024 - Washington
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