Breaking Land Inequality in Peru: Are Land Markets Enough?

Open Access
Author:
Espinoza Hermoza, Mauricio
Graduate Program:
Agricultural, Environmental and Regional Economics
Degree:
Master of Science
Document Type:
Master Thesis
Date of Defense:
June 10, 2016
Committee Members:
  • Stephan Goetz, Thesis Advisor/Co-Advisor
  • Leif Jensen, Committee Member
  • David Abler, Committee Member
Keywords:
  • Land markets
  • Land inequality
  • Peru
  • Land Fragmentation
  • Land Concentration
Abstract:
The relatively well-documented adverse effect of land inequality on economic development has brought forth a new liberal approach on land reform in Latin America. Peru has not been the exception to this trend, where policies aimed at activating rural land markets have been constantly pursued since the 1990s with the hope of breaking the unequal and dualistic land distribution that characterizes the country. In light of these market-oriented land reforms, this thesis seeks to empirically examine the factors that influence the functioning of land markets in Peru, their distributional impacts, and the scope for policy to improve outcomes. Using panel data district-level information for the Peruvian Agricultural Census that spans recent liberal reforms, this thesis estimates fixed-effects regression models to compare the change in land inequality across districts and test for inter-district differences in land market activity. Our results show that despite government efforts for activating rural land markets, both sales and rental markets are still thin and have not yet generated the volume of land transfers that would be required to achieve major changes in the land structure of the country. However, we found that sales market activity is positively influenced by the levels of titling density and credit access in the district, and that these effects are even stronger when titles and credit are provided together. On the other hand, our estimates suggest that although land markets have allowed land transfers from land-rich farmers to medium-sized farmers, this redistributive role is not observed in the lower end of the land distribution, where land markets seem to have failed in preventing the deepening of the fragmentation of rural property. Finally, even assuming that the land policy can correct all the relevant markets failures and substantially reduce transaction costs in land transfers, the evidence presented in this thesis suggests that land markets alone would not be enough to achieve a structural change toward a more balanced land structure. The still critical importance of other traditional sources of land access (e.g., inheritance) calls for alternative land policies that, in addition of providing the necessary conditions for land markets to perform a redistributive role, address the deepening of the fragmentation that arise due to inheritance processes.