The effects of land markets on resource allocation and agricultural productivity

By Chaoran Chen, Diego Restuccia, Raül Santaeulàlia-Llopis. Review of economic dynamics (Print), 2017

134 citations recorded by the source corpus.

We assess the effects of land markets on misallocation and productivity by exploiting policy-driven variation in land rentals across time and space arising from a large-scale land certification reform in Ethiopia, where land remains owned by the state. Our main finding from detailed micro panel data is that land rentals substantially reduce misallocation and increase agricultural productivity. Our evidence builds from an empirical difference-in-difference strategy, an instrumental variable approach, and a calibrated quantitative macroeconomic framework with heterogeneous household-farms that replicates, without targeting, the empirical effects. These effects are nonlinear, impacting more farms farther away from efficient operational scale, consistent with our theory. Using our model, we find that more active land markets reduce inequality, an important concern for the design of land policy. We also find that the positive effects of land markets are mainly driven by formal market rentals as opposed to informal rentals. Finally, our analysis also provides evidence that land markets increase the adoption of more advanced technologies such as the use of fertilizers.

Subfields: General Agricultural and Biological Sciences, Soil Science

View Paper: https://www.semanticscholar.org/paper/a3e88ccef828f486843d4e8fe20c3d4c0c8635a4

Citations in the corpus

• Land Reform and Productivity: A Quantitative Analysis with Micro Data (2019, unknown): “Second, in countries for which good micro data with capital exists, the capital to land and capital to labor ratios are roughly constant across farmers even in the presence of substantial land market distortions (Restuccia and Santaeulalia-Llopis, 2017; Adamopoulos et al., 2017; Chen et al., 2017).”