Land Use Restrictions, Misallocation in Agriculture, and Aggregate Productivity in Vietnam

Kien Le ()

Departmental Working Papers from Department of Economics, Louisiana State University

Abstract: We evaluate the e ects of restricted land use rights on aggregate productivity using micro-level data within a quantitative model. In particular, we exploit the Rice Land Designation Policy in Vietnam, which forces farmers to produce rice on almost 45% of plots of land. The policy provides a natural setting for investigating the aggregate e ects of land use misallocation. We quantify the impacts of this system by formulating a two-sector model featuring production and occupation choices. We also use digitized versions of Vietnam's Local Land Use Atlas and Global Agro-Ecological Zones database to construct a micro-spatial dataset that shapes important features of the model and allows us to compare the restricted against a counterfactual ecient allocation. The main findings suggest that eliminating all land use restrictions leads to 10.6% gain in agricultural total factor productivity and 4.36% increase in real GDP per capita. While misallocation in agriculture has been studied extensively, our research highlights a novel source of misallocation that is prevalent in other countries such as China, Myanmar, Uzbekistan, among others.

Date: 2018-05
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Related works:
Journal Article: Land use restrictions, misallocation in agriculture, and aggregate productivity in Vietnam (2020)
Working Paper: Land Use Restrictions, Misallocation in Agriculture, and Aggregate Productivity in Vietnam (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:lsu:lsuwpp:2018-07

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