Land and Poverty in Reforming East Asia
| Author | Martin Ravallion/Dominique van de Walle |
| Position | Director of the World Bank's Research Department/Lead Economist in the Gender Group of the Bank's Poverty Reduction |
| Pages | 38-41 |
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Lessons from Vietnam's agrarian reforms
Page 38
Both China and vietnam have made enormous progress in the fight against poverty, and the evidence suggests that rural economic growth has played a large role in this success. Using each country's own definition of poverty, with a constant real poverty line over time, China's poverty rate fell from more than 50 percent in 1981 to about 20 percent in 1991 and 5 percent in 2005. In vietnam, poverty fell from almost 60 percent to 20 percent during 1993-2004.
Land is the most important non-labor asset in any developing rural economy. The institutions determining how land is used are thus at the core of efforts to fight poverty.
China and vietnam both have had major land reform programs. This article examines the role these major agrarian reforms played in the subsequent progress against poverty and searches for lessons for the future.
We also look at what China might learn from vietnam's different path in its land policies and what other countries can learn from these star performers. lessons include the importance of the agricultural sector in the early stages of a pro-poor growth process, the potential role of market-oriented reforms in absolute poverty reduction, and the need to address pressures spurring rising inequality as reforms get under way.
In the 1980s and 1990s, China and vietnam undertook truly major reforms to the lawsPage 39 and regulations governing agricultural land. Prior to that, both countries had collectivized their farming, but both came to realize that this system was not performing well.
Although collectivized farming could ensure low inequality within each commune, this came at too high a price in terms of efficiency, because working in large brigades and sharing the output dulls the incentive for effort. The cooperatives and collectives were dismantled and the land was assigned to individual households in the commune, who had to agree to provide an output quota to the government but could keep the rest for consumption or sale. This system clearly had better incentives, and agricultural output rose accordingly in both countries.
After this important step, promarket reforms to agrarian institutions were put in place in both countries, though vietnam has gone further. China has still not taken vietnam's radical, and controversial, step of introducing a legal market in land-use rights.
The reform processes in China and vietnam were not solely concerned with efficiency. Highly inequitable outcomes from the agrarian reforms would have met with popular resistance in the short term and potentially derailed future progress against poverty by stifling the economic opportunities of a large share of the population. Future reform prospects in other areas of policymaking would also have been jeopardized by perceived failures in the initial agrarian reforms.
However, policymakers faced a potentially major threat to the reform process. as in many developing countries, the center had to rely heavily on decentralized implementation of these reforms, down to the commune level. This raised concerns about local elites-whose interests are not well served by the central government's aims-taking over the process for their own purposes. Were these concerns justified? Our research focused on vietnam's agrarian reforms, which we compared with other observations about the process in China. We first studied how land-use rights were allocated on breaking up vietnam's collectives. Individual households had to be assigned the use rights for virtually the entire agricultural land area of a country in which three-quarters of the workforce depended directly on farming.
We used econometric models of both household consumption and the behavior of local...
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