Land tenure and economic development: evidence from Vietnam

Abstract

The relationship between private property rights and economic development has been investigated by numerous cross-country studies. Nevertheless, aggregate measures of private property rights have prevented cross-country studies in general from identifying the specific institutions governing private property rights that policy reforms should consider. The present paper investigates the impact of private property rights to land on economic development in a within-country setting, exploiting the 1993 nationwide land privatization in Vietnam. Using a random sample of more than 2000 rural communes across Vietnam, our study finds that the prevalence of private land tenure has a positive and significant impact on the level of economic development, as proxied by nighttime light intensity. The magnitude of the impact, however, is sensitive to both observed and unobserved confounding factors, and overall modest. The most plausible explanations for this modest impact are the lingering insecurity that land-use certificates can be revoked by the state and the relatively high taxes and time cost of land transactions in Vietnam. These lessons are of interest not only to Vietnam with its future land reform, but also to other developing countries contemplating the privatization of agricultural land.