Vietnam’s agrarian transition in the 1990s has closely followed a now classic policy scenario for economies in transition. First one privatizes the main productive assets in this case agricultural land-use rights then one legalizes their free exchange. In the first step, the de-collectivization of agriculture meant that the land that had been farmed collectively was to be allocated by administrative means within each commune. Naturally this left inefficiencies in land allocation, with some households having more land than they are likely to have had in a competitive market allocation, while some had less.
The second step was reforming land laws so as to create the framework for a free market in agricultural land-use rights. While land remained the property of the state, Vietnam reformed land laws in 1993 to introduce official land titles and permit land transactions for the first time. Having removed legal obstacles to buying and selling land-use rights, one might expect rapid transition to a more efficient market economy in which land was re-allocated to eliminate the initial inefficiencies in the administrative assignment.
However, there are reasons to question that expectation. Other markets were still poorly developed, and in ways that could seriously inhibit realizing the efficiency gains from freeing up transactions in land. The credit market failures common in other underdeveloped rural economies were arguably even more prevalent in Vietnam at this time. Additionally, given risk-market failures and limitations on the set of available redistributive instruments, land allocation is likely to have continued to play an important role in distribution and insurance. Whether or not this role favored greater equity is unclear; while socialism may have left in-grained preferences for distributive justice, the new possibilities for capture by budding local elites well connected to the local state authorities would not presumably have gone unnoticed.
This paper studies the changes in agricultural land allocation in Vietnam during the period of policy and economic change that followed de-collectivization. We do not attempt to evaluate the impact of the 1993 Land Law per se, but rather to assess whether (as a result of the legal reforms and other policy and economic changes) the realized allocation of annual agricultural land-use rights responded to the inefficiencies of the initial administrative allocation. We also test whether other factors played a role, such as the desire for distributive justice in local decision making or the desire of local administrators to favor certain groups locally.
The following section describes key features of the setting. Section 3 describes our approach to testing whether the post-reform land re-allocation responded to the household specific efficiency losses from the pre-reform administrative allocation. Our data are described in section 4. We then present and interpret our results in section 5. Section 6 concludes.
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