Land Allocation Policy and Income Inequality: evidence from Vietnam

Vietnam has experienced a major land policy reform in recent decades, relaxing the previously imposed restrictions on land transfer and accumulation. This paper investigates the relationship between this agricultural land reform and changes in income inequality using a microdata-based decomposition framework. Results show that agricultural land reform is one of the most important drivers of income growth among middle-income households in Vietnam, and has contributed to a reduction in income inequality. However, the effect is highly heterogeneous, as it favors households with particular land types; it thus leads to an increase in income inequality in rural areas despite reducing such inequality in urban regions. The findings suggest that the policy effect of land restriction relaxation can be complex due to inequalities in new opportunities as well as the initial landholding distribution.