We empirically and theoretically examine the role of land market frictions, financial frictions, and their interaction in limiting the ability of rural landholders to engage in higher productivity irrigated agriculture and non-agricultural entrepreneurship that enable structural transformation. In the presence of these frictions, we provide evidence that the distribution of land ownership can systematically determine which localities can productively cultivate land and utilise wealth generated thus for financing non-agricultural enterprises in the long run.
STEG Project Policy Brief
• Research Theme 1: Firms, Frictions and Spillovers, and Industrial Policy,
Research Theme 3: Agricultural Productivity and Sectoral Gaps,
Cross-Cutting Issue 3: Inequality and Inclusion
Land Inequality and Rural Structural Transformation: The Role of Frictions in Land and Credit Markets
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