Land use restrictions, misallocation in agriculture, and aggregate productivity in Vietnam

This paper evaluates the effects of restricted land use rights on aggregate productivity using micro-level data within a quantitative model. In particular, I exploit the Rice Land Designation Policy in Vietnam, which forces farmers to produce rice on almost 45% of land plots. I use digitized versions of Vietnam's Local Land Use Atlas and Global Agro-Ecological Zones database to construct a micro-spatial dataset that shapes the model features and allows me to compare the restricted against a counterfactual efficient allocation. The main findings suggest that eliminating all land use restrictions leads to an 8.03% increase in real GDP per capita. While misallocation in agriculture has been studied extensively, the paper highlights a novel source of misallocation also prevalent in other countries such as China, Myanmar, and Uzbekistan. •Rights to decide how to use the land are under-explored.•Rice Land Designation Policy forces many farms to produce rice in Vietnam.•Micro-spatial datasets and household-level surveys are employed.•Removing the policy leads to an 8.03% increase in GDP per capita.