Cooperative property rights and development: Evidence from land reform in El Salvador

In cooperative property rights systems, workers jointly own and manage production, whereas in outside-ownership systems, an owner contracts workers. Despite a rich theoretical literature on how the organization of property rights matters for equity, efficiency, and specialization, little causal evidence of their impacts exists. During a land reform in El Salvador in 1980, properties owned by individuals with cumulative landholdings over 500 hectares were reorganized into cooperatives managed by the former hacienda workers. Properties belonging to individuals with less than 500 hectares remained as outside- owned haciendas. Professor Montero found that this reorganization had two important impacts. First, the reform led to a shift in the type of agriculture practiced. Compared to properties that remained as haciendas, cooperatives tend to specialize in staple crop production instead of cash crop production. Additionally, relative to haciendas, cooperatives are less productive when producing cash crops but more productive when producing staple crops. Second, cooperative property rights have led to higher incomes and more equitable wage distributions for current cooperative members relative to workers on the haciendas. These results suggest that cooperative property rights have changed the patterns of production in agriculture in El Salvador and have increased equity among workers. This evidence hopefully also serves as a starting point to understand the understudied consequences of similar land reforms that were implemented across Latin America. Understanding the long-run impacts of land reforms that reorganized properties from outside ownership towards cooperatives can provide important evidence on the implications of cooperative property rights on economic development.

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• Eduardo Montero
• cooperative property rights
• economic equity
• El Salvador
• Blue Bag Lunch Talk