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An Unintended Consequence of Historical Land Ceiling Legislations: Impact on Land Acquisition and Corporate Investment in India

Pal, Sarmistha and Saher, Zoya (2017) An Unintended Consequence of Historical Land Ceiling Legislations: Impact on Land Acquisition and Corporate Investment in India [Working Paper]

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There is a growing debate about land acquisition for infrastructure and industries in many densely populated countries. In this context, the present paper assesses the impact of the historical land ceiling legislations, largely implemented during 1960-85 to promote distributional equity, on corporate investment in India. We argue that the implementation of the land ceiling legislations had increased the transaction costs of buying land and also the price premium firms pay when acquiring land, thus inducing firms to invest less in land and capital. The detrimental ceiling effect is more pronounced when the ceiling size is more restrictive as for the most fertile land. Arguing that the variation in land ceiling size across the Indian states over time was largely dependent on choice of crops or soil fertility and as such could be treated as independent of the state authorities, our results support the conjecture that more restrictive land ceiling size has led to lower investment in both fixed and total capital output ratios at the state-level (1960-85). Further analysis of firm-level (1996-2012) data confirms that the ceiling effect persists in the long run, thus identifying an unintended consequence of land ceilings for investment and economic growth in the Indian states.

Item Type: Working Paper
Divisions : Faculty of Arts and Social Sciences > School of Economics
Authors :
Date : 17 April 2017
DOI : 10.2139/ssrn.2953427
Uncontrolled Keywords : Land ceiling legislations, Transaction costs of land acquisition, Corporate investment, Fixed and total capital-output ratios, More and less land-intensive firms, India. 1. Introd
Additional Information : This has won the best paper award at Aston India Conference, September 2017 and has been presented at Indian Statistical Institute (New Delhi), Indian Statistical Institute (Kolkata), Asian Bureau of Finance and Economic Research (Singapore, May 2017) and to be presented at the American Economic Association January 2018.
Depositing User : Melanie Hughes
Date Deposited : 17 Jan 2018 08:41
Last Modified : 17 Jul 2018 10:31

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