Land reform and human capital development: Evidence from Peru

The early establishment and persistence of landholding inequality is linked to poor long-run development outcomes. One crucial channel runs through human capital: large landowners historically underinvested in public goods such as schools, restricted workers and their children from to attending school, and extracted surplus from laborers that could have been invested in human capital. By equalizing landholdings, land redistribution should facilitate human capital accumulation. Using original data on land reform across Peru in the 1970s paired with household surveys, we conduct an age cohort analysis and find instead that higher exposure to land reform negatively impacted educational attainment as measured by the number of years of school attended. The driving mechanisms appear to be economic opportunity as well as income and child labor: individuals exposed to land reform are more likely to remain in rural areas and to have their children contribute labor to agriculture, driving down income in the long term.