This document summarizes and discusses a paper examining the impact of land fragmentation on economic diversity of farm households in Vietnam. The paper developed a theoretical model and used empirical analysis of panel data from 2004-2006 to show that land consolidation can reduce farm labor supply and increase non-farm income by releasing labor. The discussant provided consideration on further interpreting the model and empirical approach, addressing potential endogeneity, and exploring impacts across different household groups and additional outcome measures.

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Discussion of
Land reforms, labor allocation and economic diversity: evidence from Vietnam
Author: Huy Nguyen
Discussant: Thang Vo
PhD candidate at the Arndt-Corden Department of Economics
Crawford School, ANU

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Outline
 Summary
 Evaluation
 Consideration

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Summary
Aim: examining the impact of land fragmentation on economic diversity of farm households in Vietnam.
Theoretical work: Add land consolidation parameter (α), which is used as efficiency of labor use on the plot, into models of Acemoglu (2010) and Jia and Patrick (2013) to build a model estimating the impact of technical improvement on labor allocation (under 2 assumptions: Hicks neutral technical change and Factor biased technical change).
Findings:
- Technical change is Hicks-neutral: land consolidation may increase farm labor supply.
- Technical change is factor-biased: land consolidation may reduce farm labor supply and release labor to nonfarm activities.

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Summary
Empirical work: Using a panel data from VHLSS 2004-2006 (4193 hhs) to examine the impact of land fragmentation on farm labor demand and non-farm activities.
Apply Jolliffe (2004): farm households having at least one member who describes the main jobs as farming and having positive farm profits. Households with no annual crop outputs were excluded (around a half of the initial data, 2179 hhs)
Method: First difference method and Munlak fixed effects; Double hurdle model and Wooldridge (1995)
Findings: Land consolidation will reduce farm labor supply, labor intensity and improve farm profits and productivity; land consolidation may also release labor to nonfarm sectors and raise nonfarm profits.

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Contribution
 Combine a theoretical model and empirical estimations in a single paper.
 Deep understanding the research problem and the background of Vietnam. Hence, the research questions are interesting and important.
Technical change Agricultural efficiency Labor allocation &
Non-farm income
 The first empirical paper to estimate the impact of land fragmentation on labor supply and nonfarm outcomes in Vietnam.
 Various methods for empirical estimations and tests
Many
Many

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Consideration
1. Economic interpretation of the condition?
2. Simultaneity bias: Labor supply and farm outcomes may affect Simmons index and number of plots.
3. Why not other land fragmentation indexes: Januszewski index? The global land fragmentation index (GLFI)?
Demetriou et al. (2012): “Existing land fragmentation indices are poor since they only take a small number of relevant factors into account. In addition, the factors are generally given equal importance, which is not a reasonable assumption in most cases, and there is little flexibility for the planner regarding which factors should be taken into account for a specific project”

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Consideration
4. Why use log of number of plots when many others use number of plots? Why choose households having annual crop outputs instead of households having land?
5. Mean results for the whole sample. What if you estimate the impact on groups of households depending on types of production (livestock, rice and others)?
6. Use more outcomes to interpret more about the impact of land fragmentation (ex: fertilizer cost, seed cost, pesticide cost, fuel cost intermediate consumption cost, hired labor cost, wheat yield, milk yield, gross product, gross margin, operating surplus, pre-tax profit…)

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