Access to Land: Market and Non-Market Land Transactions in Rural Vietnam

In a country as densely populated as Vietnam, land is a scarce resource. This is even more so because 70 per cent of the population still reside in rural areas. Therefore, achieving efficiency and equity in the allocation of land in this context is a key priority. Furthermore, in a rapidly developing economy such as that of Vietnam, there is a pressing need to facilitate a process whereby land can change hands without large inefficiencies. For example, to ensure an efficient flow of labor resources from rural to urban areas, it is necessary that households (HHs) in rural areas are able to transfer land rights without incurring excessive transaction costs. It is also important to ensure that agricultural land can be transformed into land for residential and industrial purposes without friction, and without imposing heavy costs on farmers. Evidence from other countries on the ability of land markets to perform these functions efficiently is mixed. The studies on land markets in four African countries in Holden et al. (2008) show considerable friction in the operation of land rental markets, but also, for example in Uganda, some positive effects on allocative efficiency. Similar results are reported in Holden et al. (2011), who find that land certification stimulated the rental markets in Northern Ethiopia, and those increased rental market activities, in turn, improved the efficiency of land use. On the other hand, Deininger et al. (2003) find land markets in Nicaragua to be largely ineffective in terms of improving equity as well as efficiency.