The Impact of Institutional Arrangements on Farmland Rents in India: A Ricardian Analysis

Abstract

In addition to environmental factors, the welfare of farming communities in most developing countries depends largely on the credibility of organizations that regulate, implement, and protect different institutional arrangements for facilitating coordination between people. This study investigates whether people’s confidence in such organizations is reflected in farmland rents in India. Using data from the India Human Development Surveys, Ordinary Least Squares regression results indicate a positive relationship between farmland rents and a constructed index of confidence in different organizations. Upon accounting for the potential endogeneity in this index, Two Stage Least Squares results reveal an even stronger and significant impact. The instrument selected to address the endogeneity in the confidence index is men’s exposure to mass-media in the household, where both indexes are constructed by using the method of Principal Component Analysis. The findings of this work support the critical importance of continued investment in regional and national entities that oversee and implement various institutional arrangements for facilitating greater cooperation within farming communities.