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WP/37 Political Connections and Investment in Rural Vietnam

This paper uses household panel data from rural Vietnam to explore the effects of having a relative in a position of political or bureaucratic power on farmers’ agricultural investment decisions. Our main result is that households significantly increase their investment in land improvement as a result of relatives moving into public office. Connections to office holders appear to be important for investment because they strengthen de facto land property rights and improve access to off-farm employment and to informal loans. The findings underline the importance of informal networks for economic behaviour in environments with developing institutions and markets. They also suggest the presence of an untapped potential for economic development: if households without connections could obtain equally strong property rights and access to credit and insurance as the well-connected households, investment levels would rise substantially.
Publisher:
UNU-WIDER
Series:
WIDER Working Paper
Volume:
2011/37
Title:
WP/37 Political Connections and Investment in Rural Vietnam
Authors:
Thomas Markussen, and Finn Tarp
Publication date:
July 2011
ISBN 13 Web:
978-92-9230-402-7
Copyright holder:
© UNU-WIDER
Copyright year:
2011
Keywords:
political connections, informal networks, land property rights, investment, credit, Vietnam
JEL:
D73, H7, O12, 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
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