Free land as an industrial policy instrument

Some small towns in the US are offering free land to encourage people to settle there. The sky rocketing housing prices in larger and even mid-tier towns are driving people back to these towns. In this context, I had blogged earlier about how urbanites are utilising the work from home opportunity from Covid to flock to Canada's Atlantic coast to escape housing affordability problem. 

This is along the lines of the early American history,

In the mid-1800s, after breaking treaties and forcing the removal of Native Americans, the United States had thousands of miles of land in the middle of the country — and almost no Western settlers wanted to live there. Then, in 1862, Abraham Lincoln pulled the ultimate Manifest Destiny power move with the Homestead Act.

The government granted individuals 160 acres of free land as long as they lived on and farmed the land for 5 years, enticing Americans to claim 270m acres in states like Kansas, Nebraska, and North Dakota. Free territory was also distributed to railroad companies, which sold their surplus land to new residents at dirt-cheap rates. Buoyed by the free and inexpensive land, small towns sprung up overnight, often just a few miles from each other. These hyperlocal economies thrived with farming at the center of life.

This from the Kansas experience,

With dwindling populations, the large number of small towns has turned into a logistical and financial headache. Many of Kansas’s sparsely populated 104 counties and 627 incorporated municipalities (compare that to 58 counties and 482 municipalities in 13x larger California) struggle to pay for government services, recruit civic leaders, and hold onto businesses, health care, and schools. Towns can’t survive without enough people, and people are hard to recruit when the local economies are in shambles. So to attract newcomers, towns have attempted a dizzying array of stunts and initiatives. One of the most influential was a modern remix of the Homestead Act by Marquette. To save its school and stanch its population loss in 2003, Marquette’s leaders offered ~60 free lots for anyone willing to move in and build a house... At least 27 Kansas towns have enacted free land programs since the late 1990s. Only a few have had success.

This opens interesting possibilities. I had blogged earlier about similar free land industrial policy. For example, government wants marketing godowns and cold-storages to be established by private people in remote areas. Government has plentiful rural land. So why not offer free land to anyone willing to establish a godown or cold storage? The point being the mere establishment of a godown or cold storage would be a strong enough economic boost to the area, and being investment that would otherwise have not materialised, its net economic return would more than off-set the loss of the land. 

As part of industrial policy governments have always pursued similar approaches - eg. allotment of land to businesses at concessional rate of Rs 1 per acre as incentive to establish manufacturing facility.

This will work only if the land cost is a significant enough share of the total project cost or the transaction costs of acquiring a dispute-free land is prohibitive enough. At least in certain parts of India, the latter should be prohibitive enough.