DP17278 Colonial Paradox: Sugar, Property Rights and Land Inequality in Java

Author(s): Pim De Zwart, Phylicia Soekhradj
Publication Date: May 2022
Keyword(s): cash crops, Colonialism, Indonesia, Inequality, institutions, Property rights
JEL(s): N35, N55, Q15
Programme Areas: Development Economics, Economic History
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=17278

Sugar production is often associated with higher levels of economic inequality, particularly when taking place under colonial extractive institutions. Colonial Java is an illuminating case where the reverse was true. This paper presents detailed district-level data to suggest that, due to the specifics of the local institutional context, sugar production in the nineteenth and early twentieth centuries stimulated the expansion and persistence of communal landholding. This communal landholding consequently led to more equally distributed plots in the early twentieth century. An IV strategy, using a newly computed index of sugar suitability as instrument, is used to suggest the effect is causal. This paper shows the importance of local property rights institutions in determining the effects of export production on socioeconomic outcomes.