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Land market restrictions, women's labor force participation and wages in a rural economy

Emran, M. Shahe and Shilpi, Forhad (2014): Land market restrictions, women's labor force participation and wages in a rural economy.

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We analyze the effects of land market restrictions on the rural labor market outcomes for women. The existing literature emphasizes two mechanisms through which land restrictions can affect the economic outcomes: the collateral value of land, and (in)security of property rights. Our analysis focuses on an alternative mechanism where land restrictions increase costs of migration out of villages. The testable prediction of collateral effect is that both wage and labor force participation move in the same direction, and insecurity of property rights reduces labor force participation, and increases wage. In contrast, if land restrictions work primarily through higher migration costs, labor force participation increases, while wage declines. For identification, we exploit a natural experiment in Sri Lanka where historical malaria played a unique role in land policy. We provide robust evidence of a positive effect of land restrictions on women's labor force participation, but a negative effect on female wages. The empirical results thus contradict a collateral or insecure property rights effect, but supports migration costs as the primary mechanism.

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