Andrew Petcoff Colton J.R. Noll. Quick History What is Land Reform? Inequality Benefits Costs ...
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Transcript of Andrew Petcoff Colton J.R. Noll. Quick History What is Land Reform? Inequality Benefits Costs ...
LAND REFORM IN LATIN AMERICA
Andrew PetcoffColton J.R. Noll
Outline
Quick History What is Land Reform? Inequality Benefits Costs Examples Conclusion
Quick History – The Colonial Years
The Americas were discovered in 1492 Discovery of valuable minerals lead to
encomiendas -Ecomienda is when large tracts of land where granted to Conquistadors for exchange of a portion of the output
Few people hold the majority of land
What is Land Reform?
Also known as Agrarian Reform is a process which the government takes land and then distributes the land to the land workers
Goals of Land Reform
Provide small landowners access to land, agricultural credit, housing, education, warehouses, and technical assistance.
Three letter word affects the economy as a whole…TAX.
Economic Theory: Welfare Economics
Def: The branch of economic theory concerned with the social desirability of alternate economic states.
Pareto Efficient: An allocation at which the only way to make one person better off is to make another person worse off.
Edgeworth Box
Edgeworth Box(ctd.)
All the points on the contact curve are Pareto efficient (A,B).
C is not efficient. With A or B it is not possible to move the
point along the contact curve without making either the small or large farmer worse off.
With C it is possible to increase the resources to make one farmer better off without
Welfare Theorem
Welfare Theorem 1: A competitive economy automatically allocates resources efficiently without the need of help from the government.
Welfare Theorem 2: If society determines that current distribution of resources is unfair, it only needs to transfer resources in a way to be deemed fair. Then let the market work and it will be efficient.
Pareto efficient is not the same as socially acceptable.
Benefits
Redistributes land from wealthy to poor Leads to “political” stabilization
Breaks political power of wealthy Ex. Less than 10% of agricultural holds
contain 77% of the Brazil’s farmland Ex. 1% of landholdings encompass 80% of
agricultural land in Paraguay• Threat of land reform makes inefficient
farming by latifundistas become more efficient.
Benefits (continued)
Farmers have stronger incentive to work harder.
-Can employ family members and avoid having to hire seasonal labor at a low wage rate with low human capital. Chance to own their own plot of land. Give illusion of equality.
Costs
Higher tax rates. Lives. Redistribution of land costs. (i.e.
Economies of Scale.) Does not help the poorest of the poor. Does not work in democratic systems. Cash cropping to subsistence farming. Environmental costs.
Examples of Land Reform: Mexico (1917)
Land Reform was included in the 1917 Constitution
Nothing really happened until the 1930s during the Cardenas administration
At this time almost half the farm land was affected
Slowed down until the mid 70s
Mexico (continued)
Land was divided into what were called “ejidos.” Communal property rights on land from large
estates Land could be farmed collectively or by
individuals of the community Access passed through families but remained
in the community Each Ejidos was between 1 – 10 hectares of
land Made investments ineffective
Mexico (continued)
85% of the land given to peasant farmers from 1962-1982 was not suitable for crop producing.
The government pushed irrigation reforms (1946) but only to large scale farmers because the economies of scale farming.
Large Farms still produce 70% of Mexico’s marketable foods
The small farmers depend on what they produce for food. Some are able to sell crops for cash.
Land Reform policy considered a success (did not hurt agriculture growth)
Another example: Peru (1969)
Established by a militant government under the leadership of Juan Alvarado.
Reform motivated by desire to: 1) calm rioters and 2) break political power of latifundistas.
Government broke-up successful plantations in coastal regions. CAPs., sharecropping & renting were forbidden.
Peru (continued)
ISI controls: discriminate against the agricultural sector through exchange rate policy, imposing price controls, subsidizing food importers, all which reduced the profitability of farmers.
Land Reform policy was a failure
Conclusions
Land Reform is a Political tool It needs more than land redistribution to
be successful Amount of underused land is in short
supply Poorest of the poor are not better off
http://www.youtube.com/watch?v=saEUl9F8VjY&feature=PlayList&p=B38919C698989D9E&playnext_from=PL&playnext=1&index=2
Sources
Latin America’s Economy: Diversity, Trends, and Conflicts. Eliana Cardoso and Ann Helwege (1992).
http://en.wikipedia.org/wiki/Land_reform#Latin_America
http://www.peru-explorer.com/land_reform.htm
http://www.cato.org/pub_display.php?pub_id=1016
Sources (ctd.)
http://internationalbusiness.wikia.com/wiki/Agrarian_Reform_In_Peru
http://en.wikipedia.org/wiki/Agrarian_land_reform_in_Mexico
http://www.landreform.org/wp3.htm Rosen, Harvey S., and Ted Gayer. Public
Finance. New York: McGraw-Hall/Irwin, 2008.