Research

Average farm size is steadily declining in low-income countries, yet its consequences for structural transformation remain less understood. I study this question in India, exploiting differential district-level exposure to an inheritance reform that increased agricultural land fragmentation. I show that fragmentation hinders structural change by reallocating labor from manufacturing to agriculture. It also reduces manufacturing activity, particularly in more land-intensive industries, consistent with a role for land-related frictions. Guided by these findings, I develop a two-sector general equilibrium model of land-use competition between agriculture and manufacturing. Fragmentation affects the sectoral allocation of land through two channels. First, it shapes agricultural profitability. Second, it raises land-assembly costs in manufacturing by increasing the number of landowners firms must coordinate with for a given land requirement. I estimate the key elasticities governing these channels using farm- and firm-level microdata. I find that the average observed decline in farm size between 2001 and 2011 generates a welfare gain, but this gain masks stark distributional consequences. Real wages fall while land rents rise, implying that workers lose while landowners gain. A counterfactual that eliminates manufacturing land-assembly frictions raises the welfare gain from fragmentation by 52% and substantially attenuates the decline in real wages.

We study how access to international markets shapes the distributional effects of a large-scale external integration in the presence of poor domestic infrastructure. Exploiting India’s 1990s trade liberalization, we find that manufacturing gains and reallocation of labor out of agriculture are more pronounced in regions with better access to international ports. We develop a quantitative spatial model that reveals stark distributional inequalities from trade liberalization, with gains heavily skewed towards regions with better port access. We find that a counterfactual highway expansion specifically targeting port-connectivity completely eliminates these spatial inequalities while producing net aggregate benefits.

Structural transformation depends not only on sectoral productivity growth, but also on how transportation and communication infrastructure integrates sectors and markets in the economy. Using newly digitized spatial data, we study the role of India's expansion of roads and GSM networks during a decade of rapid economic growth and a movement of workers from agriculture into services. Interpreted through the lens of a multi-sector spatial model with non-homothetic demand, we find that infrastructure and sectoral productivity growth both account equally in explaining India's economic growth during this period. Within infrastructure, the contribution is concentrated in communication relative to transportation; and communication further operates through both output-market integration and input access. Lastly, the gains are larger in initially less urbanized districts, highlighting how infrastructure shapes both the sectoral and spatial incidence of growth.