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Land consolidation as technical change: impacts on-farm and off-farm in rural Vietnam

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  • Huy Quynh Nguyen
  • Peter Warr

Abstract

This paper studies whether land consolidation – reduction of land fragmentation – promotes or hinders the Vietnamese government’s policy objectives of encouraging agricultural mechanization and stimulation of the off-farm rural economy. It does this by viewing land consolidation as a form of technical change, making it possible to apply the insights developed in the economic literature on technical change. This treatment reveals that the impacts of land consolidation depend partly on its factor bias and partly on the degree to which labor is substitutable in production for other factors. At a theoretical level, if a technical change is factor neutral, it will reduce off-farm labor supply and slow rural structural transformation away from agriculture; if it is labor-augmenting and the elasticity of substitution between factors is low enough, the opposite effects are predicted. The paper studies these issues empirically for rice production in Vietnam, focusing on the impact that consolidation of rice land has on rice production, machinery use, and labor allocation. The findings confirm that land consolidation raises both farm productivity and farm income and stimulates increased machinery use. It also reduces farm labor supply, lowers labor intensity in farming, and thereby releases more farm labor to off-farm development, consistent with government policy objectives. Based on these findings, the paper concludes that land consolidation should be encouraged through development of land ownership rights and the promotion of land rental markets.

Suggested Citation

  • Huy Quynh Nguyen & Peter Warr, 2018. "Land consolidation as technical change: impacts on-farm and off-farm in rural Vietnam," Departmental Working Papers 2018-25, The Australian National University, Arndt-Corden Department of Economics.
    • Handle: RePEc:pas:papers:2018-25
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    References listed on IDEAS

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    More about this item

    Keywords

    Land consolidation; factor-biased technical change; rural diversification; machinery use;
    All these keywords.

    JEL classification:

    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • N65 - Economic History - - Manufacturing and Construction - - - Asia including Middle East
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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