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A teenager wears torn rubber boots in a muddy local market in Bac Ha, Viet Nam. As of 2005 figures, half the world population—more than 3 billion people–is estimated to live on less than USD 2.50 a day. Bac Ha, Viet Nam. UN Photo/Kibae Park.

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WP/35 Land Acquisition for Industrialization and Compensation of Displaced Farmers

This paper addresses the question of how farmers displaced by acquisition of agricultural land for the purpose of industrialization ought to be compensated. Prior to acquisition, the farmers are leasing in land from a landlord, either a private owner or a local government. There are three sets of relevant incentive effects in the model: the decision of the landlord to sell the land ex post to an industrial developer, and ex ante incentives of tenants and landlord to make specific investments in agricultural quality of the land. Our main result is that under a broad class of circumstances, efficiency considerations require farmers be over-compensated for their loss of agricultural income in the event of conversion.
Publisher:
UNU-WIDER
Series:
WIDER Working Paper
Volume:
2011/35
Title:
WP/35 Land Acquisition for Industrialization and Compensation of Displaced Farmers
Authors:
Maitreesh Ghatak and Dilip Mookherjee
Publication date:
July 2011
ISBN 13 Web:
978-92-9230-400-3
Copyright holder:
© UNU-WIDER
Copyright year:
2011
Keywords:
land acquisition, compensation, exchange rights, incentives, industrialization
JEL:
D23, O13, Q15
Project:
Land Inequality and Decentralized Governance in LDCs
Sponsor:
UNU-WIDER gratefully acknowledges the financial contributions to the research programme by the governments of Denmark (Royal Ministry of Foreign Affairs), Finland (Ministry for Foreign Affairs), Sweden (Swedish International Development Cooperation Agency—Sida) and the United Kingdom (Department for International Development—DFID).
Format:
online