This paper is related to a growing literature in development economics that examines the economic effects of land market imperfections and restrictions.<sup>4</sup> The focus of most of the studies has been on two mechanisms through which the effects of land restrictions are mediated: insecurity of property rights (Demsez (1967)), and collateral constraint due to inalienability of land (Feder and Onchan (1987), Feder et al. (1988), de Soto (2000)). The evidence shows that insecure and nontransferable property rights in land adversely affects incentives to undertake irreversible long-term investment and productivity (Feder and Onchan (1987), Besely (1995), Iyer and Do (2008), Holden et al. (2007), Deininger and Jin (2006), Jacoby et al. (2002)).<sup>5</sup> A number of studies find that improvements in the security of property rights in land results in increased labor supply to market, as guard labor to protect contestable land rights is not needed anymore (see Field (2007) on Peru, Iyer and DO (2008) on Vietnam, Iyer et al. (2014) on China).<sup>6</sup> Feder et al. (1988), Feder and Feeny (1991) and de Soto(2000) argue that formalization of property rights in land can potentially create collateral value and improve access to credit, though empirical evidence on this channel is mixed, at best.<sup>7</sup> Hayashi and Prescott (2008), de Janvry et al. (forthcoming), and Emran and Shilpi (forthcoming, 2015) focus on the migration costs channel; they underscore that sales and rental restrictions can significantly increase the costs of migration as a household loses its claim to future income stream from land when it leaves the village.<sup>8</sup> Hayashi and Prescott (2008) show that in prewar Japan informal inheritance custom resulted in increased rural-urban migration costs, and the resulting misallocation of labor was an important factor in low productivity. Emran and Shilpi (forthcoming, 2015) find that as a result of the increased migration costs, land market restrictions increase female labor force

> 4For an excellent early survey, see Deininger and Feder (1998).

> 5Besley (1995) finds that, in Ghana, better land rights encourage investments in tree plantation; Jacoby et al. (2002) report that farmers invest more in organic fertilizers when the threat of expropriation (land reallocation) is lower in rural China; Iyer and Do (2008) Show that 1993 land law in Vietnam that made private land rights secure and transferable led to more investments in perennial industrial and fruit crops. Holden et al. (2007) find that, in Ethiopia, low cost land certification increases investment and productivity. Deininger and Jin (2006) report that transfer rights significantly enhance investment in Ethiopia.

> 6Iyer, Meng, Qian and Zhao (2014) find that transfer of property rights to private households and subsequent removal of sales restrictions on privately-owned houses in urban areas in China during the 1980s and 1990s increased supply of labor to private sector jobs. Field (2007) finds that land titling in Peruvian urban slums resulted in substantial increase in labor hours, a shift from work at home to work outside, and from child to adult labor.

> 7Besley (1995) does not find any evidence in Ghana to support the view that land rights enhance collateral value and access to credit, and Field (2007) fails to find any significant impact of land titling in Peruvian slums on access to or use of credit. Pender and Kerr (1999) report similar findings for south India, and Iyer and Do (2008) for Vietnam. In a series of papers on Thailand in late eighties and early nineties, Gershon Feder and his co-authors find that land titling increases access to credit and investment when formal banks are important source of credit. For a summary of the evidence and a critique of the de Soto view, see Haldar and Stiglitz (2013).

> 8Besley (1995) discusses “gains from trade” as a third mechanism for the effects of land rights, where better rights increase the land price. Although he does not discuss rural-urban migration, one can interpret part of the ‘gains from trade’ as ‘gains from migration’.

2