General Equilibrium Effects of Land Market Restrictions on Labor Market : Evidence from Wages in Sri Lanka
Taking advantage of a historical quasi-experiment in Sri Lanka, this paper provides evidence on the effects of land market restrictions on wages and its spatial pattern. The empirical specification is derived from a general equilibrium model that p...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20101027083834 http://hdl.handle.net/10986/3942 |
| Summary: | Taking advantage of a historical
quasi-experiment in Sri Lanka, this paper provides evidence
on the effects of land market restrictions on wages and its
spatial pattern. The empirical specification is derived from
a general equilibrium model that predicts that the adverse
effects of land market restrictions on wages will be less in
remote locations. For identification, the study exploits the
effects of historical malaria prevalence on the incidence of
land restrictions through its effects on "crown
land". During the 16th to early 20th centuries, areas
severely affected by malaria were abandoned by households
and the land was taken over by the government. These lands
that were later distributed through resettlement programs
are subject to sales, rental, and mortgage restrictions. The
variations in the amount of crown land resulting from
different intensity of historical malaria provide a source
of exogenous variations in the incidence of land
restrictions in a sub-district. The results show that land
restrictions reduce wages substantially, and this effect is
smaller in remote locations. A 1 percent increase in land
restrictions reduces wages by about 6.6 percent at the
median travel time from an urban center, and the effect
becomes effectively zero after 6 hours of travel time. |
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