Redistribution, investment, and human capital accumulation: The case of Agrarian Reform in the Philippines

We examine whether there is empirical support at the household level for theoretical models that suggest that redistribution of productive assets can enhance opportunity and overall growth. To do so, we use a long panel data set for beneficiaries and non-beneficiaries from land reform in the Philippines. Results indicate that land reform resulted in higher investment in physical capital, a greater increase in the intergenerational transmission of human capital, and greater household welfare and productivity. The impact of obtaining land was several orders of magnitude higher than that of education and, if anything, negatively related to initial endowments. This positive impact notwithstanding, we find that the way in which land reform was implemented has reduced access to land for the landless and led to a worsening of the functioning of land rental markets. A strategy that would replace administrative mechanisms (land ownership ceilings) with economic incentives (land tax) could be associated with gains in efficiency and equity.