The effect of land market restrictions on employment pattern and wages: evidence from Sri Lanka
Shilpi, Forhad
A substantial proportion of agricultural land in Sri Lanka is publicly owned and privately farmed under lease arrangements that impose strict restrictions on land sales, rental, mortgage, subdivision and succession through inheritance. This paper investigates the eeect of these leases on employment diversi…cation and wages. The structural estimation utilizes spatial variations in the incidence of these leases and identi…es the causal eeect through a combination of instrumental variable and control function approaches. The empirical results suggest a signi…cant adverse eeect of these leases on wages and employment diversi…cation out of agriculture. The adverse eeect is more pronounced in areas closer to large urban markets. The mobility barriers created by land restrictions thus lead to poor integration of labor market across areas and a slower sectoral transition from farm to non-farm activities.
Event: Annual Bank Conference on Land Policy and Administration
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