Towns and Rural Land Concentration in India
Presented by:
Prashant Bharadwaj
Department of Economics
University of California-San Diego
Thursday, May 5, 2022
3:45 pm-5:00 pm
(different day)
Taylor-Hibbard Seminar Room (Rm103)
Using the universe of land records from a large state in India, we document three empirical facts on rural land holding concentration at the village-level: 1) rural land holding concentration is higher close to urban areas and decreases with distance, 2) the increase in land concentration near urban areas 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 concentration relationship depends positively on the size of the urban area. A simple model where individual farmers face financial frictions, a U-shaped production function in land size and farm productivity, and significant opportunity cost of farm production, explains these patterns. In this set up, farmers choose between continuing or exiting farm production in each period. Owners of medium sized farms near urban areas find it profitable to exit production on such farms. Financial and land market frictions are key factors behind small farms remaining small.