Imperfect Markets and Emerging Landholding Inequality in Cambodia

Using detailed household data from two Cambodian villages, this paper explores the cause of increasing landholding inequality in Cambodia. Through the investigation of data on land and credit markets as well are econometric analysis of land purchase and sales, this paper elucidates reasons why land as sold by smaller landholders to larger landholders. First, because the price of land is higher than the net present value of agricultural profit based on interest rate as the discount rate, buying land with loans is unprofitable. Therefore, larger landholders, who are supposed to have a larger amount of their own funds, were the major land buyers. Second, because the interest rate is higher than the rate of return from land, coping with shocks by borrowing money is more costly than selling land. Consequently, small landholders, who are supposed to lack savings to draw on, are more likely than large landholders to sell land to cope with shocks. The high land price and high interest rate are caused by credit market imperfection, which is manifested as the gap between interest rate and the opportunity cost of capital or the rate of return from land.

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Journal Article
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Japanese Journal of Rural Economics, Volume 07
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 Record created 2017-04-01, last modified 2018-01-23

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