New research from the Kathmandu-based Samriddhi Foundation indicates that — contrary to conventional wisdom — land ownership in Nepal does not promote economic mobility and may actually hold people back economically generation to generation. These findings are particularly striking given the historic prominence of land reform as a political issue in Nepal. “We have a large number of Communist parties, and their political rhetoric is quite popular. They’ve always emphasized that structural feudalism of the Nepali economy is what holds us back,” says Arpita Nepal, co-founder and research advisor at the Samriddhi Foundation. The new research, she says, will help introduce “evidence into policy and decision-making,” where leaders previously have relied primarily on “rhetoric and following their party constitution.”
Almost 70 percent of Nepalese people work in agriculture, although it only generates 27 percent of the nation’s GDP. Subsistence farming has been the norm for millions of Nepalese for generations, and approximately a quarter of the population lives below the poverty line. Although the country went through a process of land reforms during the 1950s and 60s, abolishing practices such as giving land to secure political loyalty which were seen as perpetuating elite wealth, the economic outlook for many families has not improved as a result of land redistribution. The failure of economic gains has led Nepalese political parties, such as the Communist Party of Nepal, Maoists, to push for further land reforms in recent years, including proposing mandates for communal farms, caps on how much land people can own, and prohibiting the redevelopment of agricultural land for other uses.
“There’s a very populist idea, which says that people who [historically] own land are bad and only the landless are the vulnerable people,” Nepal says. “We wanted to study this idea of whether, if someone comes from a landed family, they are truly among the elites currently. Is there a privilege that someone gets out of landholdings?”
To understand whether land ownership actually conferred economic advantages on people, the researchers had to measure economic mobility between generations. In essence, they wanted to understand whether the children of subsistence farmers who owned land were more likely to become blue collar laborers or white collar workers, or remain in agricultural labor. “Our occupational classification is very much based on real income,” says Nepal.
The researchers defined economic mobility in this way on the basis of two factors. “One is the social prestige associated with the job,” Nepal says. “In Nepalese society, parents dream their children will eventually graduate to these jobs, and that is the reason for education. Clerical jobs, working in an office, are considered to be prestigious from a social perspective.” The second factor is income, which is much higher for people working in white collar professions in Nepal than in agriculture.
However, longitudinal data on intergenerational economic mobility had never been collected in Nepal before. Instead, the researchers, with support from Templeton World Charity Foundation, relied on Nepal Living Standard Survey data collected by the Central Bureau of Statistics in 1995, 2003, and 2010 and examined how households in specific regions fared between the different survey years. “We took several characteristics of households from 1995 and 1999 and matched them with similar households in 2010,” explains Ashesh Shrestha, research manager at the Samriddhi Foundation.
While the researchers were not able to track specific households across multiple generations, they were able to compare households in 2010 that resembled those from 1995 and 2003 to extrapolate the economic mobility of children compared to their parents. In essence, if the average number of households engaged in agricultural work increased or decreased relative to other professional levels within a given region, it indicated economic mobility between generations in that region.
When they analyzed the data, they found that not only did land ownership not support economic mobility, but instead it acted as a weight on subsequent generations, slowing their progress. In essence, the very rich who also happened to own a great deal of land remained very rich, while the children of subsistence farmers who owned their land — even large amounts of land — tended to also become subsistence farmers and continued working the same land. “The way the financial system is structured in Nepal, and the way land use policy has been implemented, provides no value to agricultural land,” Nepal says. “So, you may own large tracts of the land, but the reason it’s holding you back is you cannot use that as collateral to fund your children’s education or move up.”
“You may own large tracts of land, but it’s holding you back because you can’t use it as collateral to fund your children’s education or move up.” -Arpita Nepal
In essence, because landowners cannot extract value from their land by any means other than farming it in Nepal, subsistence farmers, who typically depend on seasonal crops, struggle to generate the revenue necessary to fund education or more intensive, revenue generating agricultural activities.
“We just do not have a market mechanism that allows us to leverage land or engage in large scale commercialization,” says Nepal. “The conclusion is that if you hold large tracts of agricultural land, it’s not so beneficial to your children. Beyond that, there are a lot of intricacies to how the Nepali economy works, and a lot of land use policy and agricultural policy has created this mess.”
While land ownership did not improve intergenerational economic prospects, the researcher did identify one factor that did: education and parental occupation. The higher the educational or occupational level of parents, the more education their children tended to achieve and the better their economic prospects. (The one caveat is that, as with high levels of wealth, mobility between generations where the parents are highly educated is low, because the children are already starting out at the top.) Nepal hopes that this research will inform new policies and technical innovations in the economy to allow people to better use their land, increase education, and move beyond land reform as the dominant issue in Nepali politics.
Benjamin Reeves is a New York-based writer, filmmaker and journalist. Learn more at BenjaminReeves.com or follow him on Twitter.
