Why Are Peasant Migrations So Low in India? Economic Spaces, Transition Costs and Positive Externality
Abstract: In the Indian context, there are large land productivity differences between villages as well as within villages. There are extensive studies on the reasons for non equalization of land productivity differences intra village, in terms inactivity of the land market. But the conditions for non equalization of land productivity differences over village have not been studied. In addition to the nature of land market the paper explores whether non production costs constrain this equalization. One process of equalization of productivity differences is the migration of peasants from the high land productive/ high growth regions to the low land productive regions with an intention to organize production in the area that they have migrated into. This necessitates the identification of two economic spaces in which the individual negotiate and make decision. The peasant migrations are from one economic structure/space where the institutional structure is market oriented to another structure/space where the institutional structure/space is personalized exchanges. If one considers transactions costs as the costs of structuring exchanges, the movement of the peasant from the modern economic space to the traditional economic space, has an added non production costs as these agents have to understand the institutions of structuring exchanges in the traditional economic space and need to change the rules of structuring exchange if they want to succeed. If one considers the agents in the traditional economic space to be in a ‘quasi-equilibrium’ before the entry of the migrants, the success of the migrant de-stabilizes the local equilibrium generating a social costs to their intervention. These costs are identified as transition costs in the paper. If the peasants perceive that these costs are high and/or institutions to internalize these costs are incompletely formed there could be low levels of migration of peasants.
