The Economic Effects of Land Redistribution: The Case of a Community-Based Rural Land Development Project in Malawi

Abstract

Land reform in countries with high levels of land inequality is seen by most development experts as an effective means of reducing poverty, since land enriches the asset portfolio of poor households (HHs) and carries with it the potential for agricultural production and entrepreneurship. The objectives of land redistribution are largely classified into (i) social, (ii) economic (iii) political and (iv) environmental. As expressed by Binswanger et al. (2009), advocates of social land reform expect little overall economic gain from the reform, but see it as a way to provide some security and subsistence to a large unemployed rural labor force. To them, the main thrust of agricultural development is to come from large-scale farms and the supporting agro-industrial sectors. The advocates of economic land reform stress the productive superiority of family farms; and they expect the land reform to make a significant contribution not only to agricultural production, but also to rural employment, self-employment, and poverty reduction. The arguments in favor of economic land reform presented above are also consistent with the economic theory which states that a one-time egalitarian distribution of assets in an environment of imperfect markets is associated with permanent higher levels of growth (Deininger et al., 1999). Consistent with this notion, Aghion et al. (1999) express the fact that redistribution in an economy can be conducive to growth. Furthermore, cross-country regressions (Birdsall and Londono, 1998; World Bank, 2001) also provide evidence that greater inequality in the distribution of assets such as land is associated with lower subsequent growth.