The economics of land fragmentation in the north of Vietnam

Land fragmentation, in which a single farm household operates more than one separate piece of land, is significant issue in Vietnamese agriculture, especially in the North. For the whole country, there are about 75 million plots of land, an average of 7-8 plots per farm household. Such fragmentation can be seen to have negative and positive benefits for farm households and the community generally. The negative impacts can be reduced mechanisation, higher cost, loss of land due to boundaries, increased negative externalities, and more limited application of new technologies. On the other hand, land fragmentation may have some benefits to farmers such as spreading output risk, seasonal labour use, and crop diversification. Comparative static analysis and analysis of survey data have led to the conclusion that small sized farms are likely to be more fragmented and the number of plots held by a household is not a significant determinant of yield and output risk spreading but is a significant factor in crop diversification. Policies which allow the appropriate opportunity cost of labour to be reflected at the farm level may provide appropriate incentives to trigger farm size change and land consolidation. Policies which tip the benefits in favour of fewer and larger plots such as strong and effective research and development, an active extension system and strong administrative management may also lead to land consolidation and thus allow some of the benefits which will accrue to the economy more generally to be obtained by farmers.