Cooperative Property Rights and Development: Evidence from Land Reform in El Salvador

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Abstract:

In cooperative property rights systems workers jointly own and manage production, whereas in outside ownership systems, an owner contracts laborers. Despite a rich theoretical literature on how the organization of property rights affects production, there is little causal evidence on the productivity implications of cooperative property rights. During a land reform in El Salvador in 1980, properties owned by individuals with cumulative landholdings over 500 hectares were reorganized into cooperatives managed by the former hacienda workers. Properties belonging to individuals with less than 500 hectares remained as privately-owned haciendas.  Using the discontinuous probability of a property being becoming a cooperative and regression discontinuity design, I present causal evidence on the effects of cooperative property rights relative to outside ownership on agricultural productivity and economic development. The reform cooperatives are (i) less likely to produce cash crops and more likely to produce staple crops; (ii) less productive when producing cash crops; but (iii) more productive when producing staple crops. Additionally, cooperatives have more equitable worker income distributions and higher incomes relative to hacienda workers. The results are consistent with an incomplete contracting model comparing cooperatives and haciendas.

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Last updated on 01/13/2018