Tenurial security and agricultural investment
Evidence from Vietnam
In Vietnam, all lands belong to the state, which assigns usufruct rights to those lands to individuals and households. In 1993, the state gave 20-year usufruct rights to growers of annual crops, and 50-year usufruct rights to growers of perennial crops.
In 2013, as the usufruct rights of growers of annual crops were about to expire, the Vietnamese government passed a law — the Land Law of 2013 — that extended the usufruct rights of all landowners by 50 years. We exploit this largely unanticipated shock to study the effect of tenurial security on agricultural investment.
Using a difference-in-differences design, we find that the Land Law of 2013 is associated with a higher likelihood of investment by growers of annual crops in irrigation technology or soil and water conservation, but not other types of investment. Our results are robust to controlling for endogenous switching from annual to perennial crops, and our data support the parallel trends assumption.