Equity and efficiency impacts of rural land rental restrictions: Evidence from India
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Recognition of the potentially deleterious implications of high inequality of opportunity due to a biased asset distribution has led to increased interest in land reforms. However, little attention has been devoted to the potential longer-term impacts of the measures used to implement such reforms, despite evidence that, the restrictions on land rental in rural areas they imply can have potentially far-reaching consequences. Use of state level data on rental restrictions, in conjunction with a nationally representative survey from India suggests that, contrary to their original intention, rental restrictions significantly reduce supply of land to the rental market, prevent land access by the landless, and by more productive producers. Ways to counter these effects by liberalizing land rental markets are discussed.