The lasting legacy of colonial land tenure system in India

Why are some parts of India more productive than the rest of the country? Professors Abhijit Banerjee and Lakshmi Iyer have a new explanation.

They trace it back to colonial times. Back then, areas where the land revenue collection was taken over by the British between 1820 and 1856 are much more likely to have a non-landlord system, for reasons that have nothing to do with factors that directly influence agriculture investment and yields. They show that areas in which proprietary rights in land were historically given to landlords have significantly lower agricultural investments and productivity in the post-independence period than areas in which these rights were given to the cultivators.

Map (click to enlarge)

History, Institutions, and Economic Performance: The Legacy of Colonial Land Tenure Systems in India (PDF file)
Abstract: We analyze the colonial land revenue institutions set up by the British in India, and show that differences in historical property rights institutions lead to sustained differences in economic outcomes. Areas in which proprietary rights in land were historically given to landlords have significantly lower agricultural investments and productivity in the post-independence period than areas in which these rights were given to the cultivators. These areas also have significantly lower investments in health and education. These differences are not driven by omitted variables or endogeneity problems; they probably arise because differences in historical institutions lead to very different policy choices.