Abstract
Productive assets promote the economic well-being of the rural poor. However, where cultural obligations and market frictions limit the exchange or ability to relinquish such assets, they may restrict access to high-return economic opportunities and undermine asset benefits causing a microeconomic parallel to the ‘resource curse’. Using an instrumental variables strategy and variation arising from sibling sex composition and Hindu inheritance customs that favor sons, I test this hypothesis by estimating the long-term causal effect of inheriting agricultural land in rural India. Consistent with standard models, inheriting land facilitates borrowing and increases household consumption. Yet, where the ability to fully utilize land through markets is severely constrained cultural obligations or land market transaction costs, the effect on consumption is entirely attenuated and negative for those who inherit at an early age. Those who inherit land are significantly less likely to migrate to urban areas and enter non-agricultural work in rural areas; effects that are accentuated by such frictions. These findings suggest that inheriting land greatly influences occupational trajectories and can suppress consumption to an extent that may overwhelm its direct benefit.
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