Tenancy, Land Redistribution, and Economic Growth A Case of Korea, 1920-1960

Abstract

Agriculture is the largest and the most important industries in many developing countries. A typical pattern observed in these countries is high inequalities of land ownership, that is, a small number of people own large portion of arable lands and large number of farmers have a small piece of land or even don’t have anything. Farmers usually lease land wholly or partially from large landowners and pay typically 50% of their harvest. This tenancy or sharecropping contract imposes heavy burden on farmers, which results in their poverty. Scholars and policymakers claimed that the burden of rent lowers productivity of farmers and that the low income further prevents the farmers from investing for the future. These factors aggravate living condition of farmers and ultimately economic growth of the country. Land reform is regarded as a solution to break this vicious circle. Land redistribution can improve farmers’ income, and this allows them to invest for improve quality of land or for educating their children. Therefore, it is very important to examine how would land reform is implemented, how would land reform changes level of inequality, and how would it change production activities and investment, and so forth. The goal of this study is to investigate, arguably, a successful case of land reform, the land reform of Korea. During the colonial period from 1910 to 1945, almost 50% of farmers were tenants without having any land at all and 20% were partial tenants. After the liberation in 1945, the Korean government made efforts to perform land reform, and it was completed by 1951. Investigating the impact of land reform on agricultural productivity and human capital investment will contribute to better understanding Korean economic development. And it will provide important implications for many developing countries. For this goal, we reviewed previous studies on land reform. And then, we explored the impact of land reform on agricultural productivity and its contribution to human capital accumulation. Using prefecture level data, we estimated the impact of land ownership in this period. Our estimation shows that land reform improved agricultural productivity. This implies that land reform could contribute to economic growth after the liberation. We then performed empirical analysis on the relationship between the land reform and the secondary school enrollment rate is conducted to examine whether the land reform has contributed to the accumulation of human capital in Korea by utilizing the gun level data. The possibility of effect being different on gender is also evaluated. The results imply that the region with higher increase in share of independent farmers during the land reform show higher increase in secondary school enrollment rate. This proves the hypothesis that land reform influenced positively on the accumulation of human capital. Also, the secondary school enrollment rate of female increased as the share of independent farmers rose, when the increase in enrollment rate of male proved to be statistically insignificant. This result is interpreted as when the income level of farmers went upwards by the land reform, female, who was neglected in education due to male offspring preference, relatively gained more opportunity for education than male did.