The Effect of Rural Land Mortgaging on Rural Transformation at the Regional Level in Bangladesh

Abstract

Land mortgaging plays a significant role in Bangladesh's economy due to the reliance of a significant portion of its population on agriculture and the growing importance of land tenure systems in promoting agricultural development and employment diversification. Yet, little is known about its role in rural transformation. The objective of this research is to examine the role of land mortgaging in the rural transformation in Bangladesh. The effect of land mortgaging is examined on two measures of rural transformation—(1) the share of high-value agricultural commodities and (2) the share of nonfarm employment opportunities across small, medium, and large farms. The study utilizes panel data for 64 districts from 2000 to 2016 using the Household Income and Expenditure Survey data and employing econometric modelling. Using the Fixed Effects Model, Ordinary Least Squares, and Feasible Generalized Least Squares, we found a positive and statistically significant relationship between the amount of land mortgaged out and rural transformation. The findings reveal that land mortgaging acts as a significant catalyst for rural transformation, facilitating investment in high-value agriculture and diversifying income through non-farm employment. The analysis further highlights the variability of this effect across different farm sizes, with smaller farms showing a more pronounced positive effect. Access to electricity and technology were also found to have significant positive associations with rural transformation, underscoring the role of infrastructure and technological advancements in agricultural productivity and employment diversification. The findings suggest that targeted policy interventions that consider the intricate effects of land mortgaging can enhance agricultural efficiency and support the economic diversification of rural areas in Bangladesh.