Intuitively, if poor people don’t have land of their own and are forced to work for a few major landowners who have monopolized all the fertile land in the country, there’s a bargaining problem: poor people have no other options and because they are so numerous they can be played out against each other by the landowners. Wages tend to remain low in such a scenario (supply and demand, remember). That’s a recipe for a very unequal society. So the intuitive case for land reform is strong, especially when you consider that equality in land ownership isn’t just a matter of fairness but is also good for economic growth.
On the other hand, some notable attempts have gone horribly awry. Land reform policies in Zimbabwe – supposedly implemented for the benefit of the poor but probably for other reasons – have made things even worse for the poor. Why? Cutting up large chunks of land and giving a lot of poor people a very small piece can undo economies of scale. Furthermore, expropriating large landowners forces them out of business, and a lot of know-how will be lost.
So, what’s the deal? I guess it all depends on how land reform is done. Things don’t have to turn ugly. Land reform doesn’t have to be counter-productive. Property rights in general, and more specifically property of land in poor agrarian countries, are very important for the poor.
It is sometimes implied that improving property rights primarily favors the rich, conjuring up the image of rich owners of capital securing greater rents. However, there is increasing evidence that secure land rights, in particular, are an important vehicle for the poor that may promote both equity and efficiency. Lin…, for example, showed that the move from collective to household farming in China starting in 1978 led to large productivity increases in agriculture. …
Obtaining property rights over land in urban areas can also help poor households to gain access to credit. (source)