to distinguish between migration and other channels. If migration cost is the main mechanism driving the intersectoral reallocation of labor, then our model predicts lower wages in areas with higher incidence of land restrictions. In contrast, wage rate will remain largely unaffected by land restrictions if either credit constraint or insecurity of property requiring guard labor is important (assuming no change in migration costs, and no policy restrictions on rural-urban labor mobility).

To provide evidence on the effects of land market restrictions on occupational choices, we follow Emran and Shilpi (forthcoming, 2015) and exploit a historical quasi-experiment in Sri Lanka where the crosssection variations in the incidence of land restrictions across different sub-districts (i.e., proportion of land under policy restrictions) were primarily determined by historical malaria prevalence through its effects on ‘crown land’.<sup>12</sup> Historical malaria caused exodus from the affected areas, and the land abandoned by the households was nationalized by the colonial government and designated as crown land. The crown land was later distributed through settlements after independence, and restrictions on sales, mortgage and rental were imposed by the government.<sup>13</sup> This created a positive correlation between historical malaria incidence and the incidence of land restrictions in an area through the availability of crown land. We use this positive correlation between historical malaria and incidence of land restrictions in a sub-district to identify the causal effects of land restrictions on structural change in the rural economy. As noted in Emran and Shilpi (forthcoming), the strength of the identification strategy derives partly from the following observations: (i) a successful nationwide malaria eradication program was implemented in Sri Lanka in 1947; malaria endemicity fell close to zero by 1950-51.<sup>14</sup> Historical malaria estimate from 1937-41 is used in this paper to identify the effects of land market restrictions in 2002 (survey year for our data), (ii) the timing of the malaria eradication program was determined by technological breakthrough (DDT), and thus can be treated as plausibly exogenous,<sup>15</sup> and (iii) most of the current population in a subdistrict devastated by high historical malaria were never exposed to historical malaria there, as they were resettled

> 12We use the data on malaria endemicity at the district level for 1937-41 compiled by Newman (1965). Emran and Shilpi (forthcoming, 2015) exploit historical malaria incidence to analyze the effects of land restrictions on male and female wages, and women’s labor force participation.

> 13Over time, restrictions on mortgage have been relaxed when dealing with public banks.

> 14Malaria endemicity is measured by enlarged spleen rates. Reported malaria cases in Sri Lanka were reduced from about 3 million per year during pre-eradication era to only 29 in 1964 (Harrison, 1978). The number of malaria death cases were 30 in 2002 among a population of 21 million. The reported malaria death were 4 in 2003, and 0 in 2005.

> 15Although DDT was first synthesized in 1874, its insecticidal properties were discovered in 1939 by Swiss scientist Paul H Muller. It was widely used during second World War to control malaria and typhus, and after the war DDT was made available as an agricultural pesticide and for malaria eradication programs.

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