Land Acquisition, Markets and Political Networks: Evidence from the Indian Sundarbans

Abstract

In recent times, land acquisitions in India for both public and private projects are facing stiff political resistance. Existing studies on land acquisition mostly focus on optimal compensation that would secure the consent of land owners. In this article, we argue that besides compensation, membership in different types of networks such as political parties and self-help groups might influence landowner consent. This could occur either because of pro-social concerns or access to better investment opportunities for the compensation amount. Using survey data from flood prone Indian Sundarbans, where the government sought to acquire land to construct embankments, we find evidence supportive of our hypothesis. The survey elicited reservation price response from land owners for a hypothetical land acquisition program. Our estimates show that land owners with self-help group members are more likely to have a higher ask price for agreeing to land sales. In contrast, controlling for length of party association, members of political networks are more likely to sell their land and have a lower reservation price than their non-political counterparts. Our results suggest that, rather than only increasing the compensation package, which is a stock of wealth, it is equally important to enhance the flow of income to ensure consensual land sales.