Land fragmentation and household income: First evidence from rural Vietnam

Abstract

We analyze the impact of land fragmentation on household income in rural Vietnam. Vietnam offers an especially interesting case study as fragmentation has been a direct outcome of land reforms since the early 1990s. Our study provides the first evidence that land fragmentation has negative consequences for household income, possibly because of its negative effects on crop income. Notably, using the Instrumental Variables (IV) method, we find that the negative effect is much greater after addressing the endogeneity of land fragmentation. IV analysis, therefore, suggests that a conventional approach which often uses the Ordinary Least Squares (OLS) method, ignoring the endogeneity of land fragmentation, is likely to underestimate the impact of land fragmentation on rural households. In addition, we find that the occupation of household heads was a major factor contributing to household income. Household income was also largely determined by some commune-level factors, such as road access, susceptibility to natural disasters and economic conditions. Our findings offer two key policy implications: (i) reducing land fragmentation would minimize its negative consequences for household income by reducing its negative effect on crop income; (ii) there is a need to increase job opportunities for rural households by improving access to better education, and increasing the demand for skilled labour. Both measures should be of practical use in rural areas.