Elsevier

World Development

Volume 122, October 2019, Pages 693-712
World Development

Economic inequality and loss of commons: Evidence from India

https://doi.org/10.1016/j.worlddev.2019.06.012Get rights and content

Highlights

  • Governance mechanisms to reclassify common land can originate either from within a village or from the state.

  • We find that economic inequality and privatization of common land through village governance mechanism have a non-monotonic relationship.

  • However, greater inequality leads to greater state-facilitated leasing of common land within villages.

  • Multiple dimensions of inequality (including social heterogeneity) must be accounted for to establish a robust relationship between economic inequality and loss of commons.

Abstract

Economic inequality determines collective goods provisioning as well as common pool resources outcomes. However, there is little theoretical or empirical understanding of how (if) inequality influences loss of commons. Using a comprehensive nationally representative dataset from India, we show why this relationship is ambiguous when local commons are governed under an incomplete decentralization regime where higher levels of government retain substantial residuary powers. We establish a non-monotonic relationship between economic inequality and local privatization of the commons within villages. However, economic inequality increases the likelihood of state-facilitated leasing of commons to private interests. We also delineate the role of social heterogeneity in alienation of commons. We use several empirical strategies to establish the robustness of our findings and mitigate possible endogeneity.

Introduction

Access to common pool land resources (CPLRs) such as forests, pastures, grasslands, and barren wastelands is an important determinant of economic well-being in rural communities around the developing world (Jodha, 1986, Jodha, 1992, Beck and Ghosh, 2000, Beck and Nesmith, 2001, Lesorogol, 2008, Wolford et al., 2013).2 In spite of the well recognized poverty alleviating role of CPLRs (Jodha, 1992, Reddy and Chakravarty, 1999, Agrawal, 2001, Anseeuw et al., 2012), they continue to record alarmingly rapid declines (Mwangi, 2007, Fuys et al., 2008, Robertson and Pinstrup-Andersen, 2013, German et al., 2013). This loss is primarily driven by changes in property rights – land managed and accessed as commons is re-classified as private property (Lesorogol, 2003, Goetter and Neudert, 2016). In fact, different forms of privatizations may have different rules (and, hence, different implications for efficiency and equity) but they certainly entail loss of access to a common good (Mansfield, 2004). One of the key factors recognized in the literature to influence outcomes of commons is inequality. While there exists a larger scholarship exploring the impact of inequality on several commons’ related outcomes, its impact on loss of CPLRs has received limited attention. In this paper, we establish two principal and contrasting pathways through which economic inequality influences the loss of CPLRs in India.

We argue that the linkage between inequality and loss of commons is driven differently based on the underlying governance mechanism. Commons are often governed under an incomplete decentralization regime where higher levels of government retain substantial residuary powers. For instance, in India, while village communities are frequently accorded right to access and manage commons, the ownership of the land still rests with the state.3 To differentiate between governance mechanisms in loss of commons, we exploit the difference in origins of the diversion of land. Common land in a village may be diverted through household encroachments that are subsequently legalised. Alternatively, land may be diverted through long-term leasing of commons by the state to individuals or commercial entities not belonging to the village. This difference allows us to highlight the contrast between governance processes originating within the village and from the state-level. Drivers of privatization within a village, i.e. the incentives for households to appropriate CPLRs, are influenced by the degree of inequality within the community. Relatedly, there exists extensive literature on commons documenting the impact of economic inequality on collective action, provisioning of collective goods4, and informal norms albeit with limited consensus. Scholars find positive (Baland and Platteau, 1999, Kurian and Dietz, 2004, Alix-Garcia, 2008), negative (Varughese and Ostrom, 2001, Ostrom, 1990), U-shaped (Bardhan and Dayton-Johnson, 2000, Dayton-Johnson and Bardhan, 2002) and ambiguous (Baland & Platteau, 1999) impacts of wealth inequality on successful collective action. Across these local level institutions, it is noted that elites exploit their economic and social influence to legalize encroachments on CPLRs (Jodha, 1990, Iversen et al., 2006, Udry, 2011). Similarly, drivers for the state to lease out commons reflect multiple ways of coping with inequality. For example, more land may be diverted in unequal regions to attract industrial investments (Lele & Purushothaman, 2011) or to implement stronger redistributive policies to ease pressures of electoral competition (Wily, 2011, German et al., 2013, Dell’Angelo et al., 2017, Mansbridge, 2014). Incentives for diversion of land originating within a village or by the state are also influenced by the ecological integrity of CPLRs which is, in turn, affected by social and economic inequalities (Fuys et al., 2008). To the best of our knowledge, there is no prior research establishing the role of economic inequalities in the loss of commons originating simultaneously from within the village and the state.

Given the potentially endogenous relationship between inequality and the loss of CPLRs, any attempt at a causal estimate is econometrically challenging. The extent of dependence on commons gives rise to potential reverse causality concern between economic inequality and loss of commons. Moreover, unobserved variables such as the structure of the local economy may lead to greater inequality as it may leave the poor behind. At the same time, economic activity might also lead to greater demands for land and therefore lead to greater loss of CPLRs. In such cases, ordinary least squares (OLS) models will be biased. We attempt to address such concerns in a variety of ways.

We use nationally representative data from the 54th round of the National Sample Survey Organization’s data (1998) on the status of CPLRs in India. It is the only national level large-n data on CPLRs available in India and, to the best of our knowledge, across the globe. This data provides us with a very rich set of covariates at household and village levels including indicators for agro-climatic zones. We augment this data further by adding a few key district level variables to account for unobserved heterogeneity in a manner that few other studies have.

There is a lack of consensus on the direction of the relationship between economic inequality and a number of commons outcomes. Accordingly, we first use non-parametric regressions to determine the relationship between inequality and loss of commons. We then estimate basic regressions accounting for this shape. Further, we adopt an instrumental variable approach to mitigate the potential endogeneity concerns. We construct two variables at the district level from the 1991 national census data as instruments for economic inequality – proportion of female and male cultivators to the total female and male working populations respectively. These proportions represent land inequality indirectly and pre-date the year when the loss in commons was recorded. Finally, we also use the dose response function approach of generalized propensity scores as a robustness check for the impact of economic inequality, a continuous variable, on loss of commons.

This paper contributes to the literature in a number of different ways. First of all, our focus on loss of commons is distinct from the ecological quality of commons that has been widely studied (Agrawal, 2014). Next, we explore two alternative ways by which land may be lost thereby tying the literature on community governance mechanisms with the larger literature on subnational governance. This is crucial as CPLRs are characterized by ambiguities in legal classification by the state and in property rights operative at the community level specially in developing countries (Robinson, 2008, Lele and Purushothaman, 2011). While community-level privatization of commons has been documented through case-studies, state-led diversion of land has not received adequate attention in the literature on commons. We present a unified data and statistical framework using a nationally representative dataset that allows us to study both community-level and state-level mechanisms for loss of commons. This data also provides a unique opportunity to study these relationships after accounting for a wide range of concerns on a scale that is much wider than most other analyses attempted thus far.

We account for the key attributes that have lead to inconsistent findings in the literature: various dimensions of inequality, type of commons, and bundle of rights. We address the oversight attributed to lack of consensus on impact of economic inequality on commons’ outcomes – accounting for other dimensions of inequality (Andersson & Agrawal, 2011). While we focus on establishing the impact of economic inequality measured using a land-based Gini index, we also include social heterogeneity index and gender-based inequality in the analyses. In addition, the data allows us to extend the literature beyond the limited focus on pastures and forests to include all forms of CPLRs (Laerhoven & Ostrom, 2007). We also account for differential rights to access and manage commons that influence voluntary collective action institutions as defined by Ostrom (1990). Further, we account for important sources of variation in our estimation that could lead to bias otherwise. For example, we account for geographical and ecological differences across different parts of India that can lead to different kinds of dependencies on the commons. We also account for community-specific characteristics that are known to be relevant for the sustainability of CPLRs. Thus, our findings have a stronger external validity than has been possible in the literature so far that is often limited to understanding these mechanisms in specific communities or restricted to specific types of commons. In fact, given the broad similarities in dependence on as well as governance of commons in large parts of the developing world (Williams, 1998), these findings are relevant for analyses of commons’ outcomes beyond India. Finally, our use of multiple econometric approaches allows us to extend the careful descriptive studies on loss of commons thus far to demonstrate a robust relationship between inequality and loss of commons originating from two different governance levels.

We find that economic inequality affects the loss of commons in different ways due to the contrasting governance mechanisms originating from the village and state levels. Our estimates shows that economic inequality has an inverted U-shaped relationship with privatisation of land within a village. This suggests that traditional concerns of elite capture, while still relevant, are not necessarily always detrimental to existence of the commons. On the other hand, we find that increase in economic inequality within villages results in higher likelihood of state-facilitated leasing of land. Whether the underlying motivation is welfare enhancement or vested interests, leasing common land to households not belonging to the village is equity reducing in the short run as poor are disproportionately dependent on this common land. Our findings clearly indicate that it is crucial to account for the origin of loss as well as type of inequality for understanding loss of commons. Since loss of commons originating from village and state demonstrate different relationships with economic inequality, not accounting for the origin of loss may lead to erroneous results.

The rest of paper is organized as follows: Section 1.1 provides an overview of CPLRs in India, Section 2 expands on the literature on inequality in the context of commons, Section 3 covers the data and empirical strategy, Section 4 presents the results and Section 5 concludes.

Households in rural India depend on commons to complement and even augment their livelihoods. CPLRs support households in multiple ways including providing income from extracting timber and non-timber forest produce. Village-level studies estimate that commons’ contribute between 12 and 23% to the income of rural households (Jodha, 1990, Beck and Ghosh, 2000). The only comprehensive, nationally representative survey on commons in 1998 (the dataset used in this paper) reported that 48% of rural households depend on commons directly, extracting resources worth 3% of their monthly consumption expenditure (NSSO, 1999). Commons also buffer and smooth consumption opportunities for poor households during the pre-harvest seasons and in times of economic distress (Shackleton, Shackleton, Buiten, & Bird, 2007). Consequently, the right to access commons has an important equity promoting role in the rural economy (Beck & Nesmith, 2001). Nonetheless, a steady decline in area under CPLRs has been recorded in India over the preceding three decades (Jodha, 1985, Jodha, 1987, Jodha, 1989, Pasha, 1992, Yanagisawa, 2008, Lele and Purushothaman, 2011, Salman and Munir, 2013). Using reclassification of land-use statistics, Chopra, Kadekodi, and Murthy (1990) assessed area under CPLRs to be 21.55% of India’s total geographical area in 1980–81. NSSO (1999) estimated that area under CPLRs had reduced to 15% by 1998 with district-level losses within states varying between 1 and 32%.5 Given the nature and extent of dependence, such loss of CPLRs has severe implications for rural livelihood strategies. It is noteworthy to add here that land redistribution in India has not been recorded to achieve the desired goals. For instance, abolition of feudal system and subsequent land reforms in 1950s benefited the better-off households to a greater extent than the poor (Jodha, 2000). Even when land under commons was redistributed to poorer households, they often disposed of it due to lack of technical skills and complementary inputs to put it to productive use (Iyengar & Shukla, 1999).

Section snippets

Common land and economic inequality

Economic inequality influences incentives to divert common land through governance processes that operate either at the village level or at the state level (Fig. 1). Interactions between diverse actors (including community leaders, legitimate representatives of the state and corporate representatives) at both these levels of governance exploit the unevenness of formal and informal ‘bundle of powers’ (Ribot & Peluso, 2003) to divert commons and, thereby, result in alienation of most resource

Data and empirical strategy

We use the data from Government of India’s National Sample Survey Organization (NSSO).7 NSSO conducted a nationally representative survey in 1998 on common pool resources in India. This was the first, and so far only, nationally representative

CPLRs lost to local privatization

Coefficients for Gini index and squared Gini index are positive and negative respectively in all linear probability and logit models without and with state and agro-climatic zone controls (Table 2). This shows that economic inequality and local privatization have a non-monotonic relationship within villages. We follow the approach suggested by Lind and Mehlum (2010) to test this inverted U-shaped relationship. Models without and with state and agro-climatic zone controls reject the presence of

Conclusion

The impact of inequalities on management of commons is well documented. Scholars, following the seminal works of Olson (1965) and Ostrom (1990), have explored the role of inequalities in private incentives to conserve and group governance for cooperation respectively in the context of ecological sustainability of commons. However, role of inequalities in loss of CLPRs is not adequately explored. Majority of the existing research is based on case studies, often exploring outcomes in the context

Acknowledgement

The authors thank the anonymous referees and Dr. Sumit Mishra for their helpful suggestions. This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.

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    1

    The research reported here was partly conducted when Malghan was at the Princeton Institute for International and Regional Studies, Princeton University, Princeton, NJ 08544, USA.

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