Assessing the Functioning of Land Rental Markets in Ethiopia

Assessing the Functioning of Land Rental Markets in Ethiopia

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Although a large theoretical literature discusses the possible inefficiency of sharecropping contracts, the empirical evidence on this phenomenon has been ambiguous at best. Household-level fixed-effect estimates from about 8,500 plots operated by households that own and sharecrop land in the Ethiopian highlands provide support for the hypothesis of Marshallian inefficiency. At the same time, a factor adjustment model suggests that the extent to which rental markets allow households to attain their desired operational holding size is extremely limited. Our analysis points towards factor market imperfections (no rental for oxen), lack of alternative employment opportunities, and tenure insecurity as possible reasons underlying such behavior, suggesting that, rather than worrying almost exclusively about Marshallian inefficiency, it is equally warranted to give due attention to the policy framework within which land rental markets operate.

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Bibliographic Details
Main Authors: Alemu, Tekie, Deininger, Klaus, Ali, Daniel Ayalew
Language:English
Published: World Bank, Washington, DC 2007-12
Subjects:AGENTS, AGRICULTURAL ECONOMICS, AGRICULTURAL LAND, AGRICULTURE, ALLOCATION OF LAND, ATTRITION, BARRIERS TO ENTRY, COMPARATIVE ADVANTAGE, CONTRACTUAL ARRANGEMENTS, CULTIVATED LAND, CULTIVATION, DEVELOPMENT ECONOMICS, ECONOMETRIC ANALYSIS, ECONOMIC DEVELOPMENT, ECONOMIC EFFICIENCY, ECONOMIC GROWTH, ECONOMIES OF SCALE, EFFICIENT OUTCOMES, EMINENT DOMAIN, EMPLOYMENT, EMPLOYMENT OPPORTUNITIES, EVICTIONS, FACTOR MARKETS, FAMILY LABOR, FARM SIZE, FERTILIZER USE, FUTURE RESEARCH, GENERAL EQUILIBRIUM, GINI COEFFICIENT, HOUSEHOLDS, HUMAN CAPITAL, INCENTIVE EFFECTS, INCOME, INEFFICIENCY, INHERITANCE, INSURANCE, IRRIGATED LAND, LABOR MARKETS, LAND ADMINISTRATION, LAND DISTRIBUTION, LAND ECONOMICS, LAND LEASING, LAND MARKETS, LAND OWNERS, LAND OWNERSHIP, LAND PRODUCTIVITY, LAND QUALITY, LAND REDISTRIBUTION, LAND REFORM, LAND RENTAL, LAND RESOURCES, LAND RIGHTS, LAND SETTLEMENT, LAND TENANCY, LAND TENURE, LAND TRANSFERS, LAND USE, LANDLORDS, MARGINAL PRODUCT, MORAL HAZARD, MOTIVATION, OUTPUTS, PERFECT INFORMATION, PERFECT MARKETS, POINTS, POLITICAL ECONOMY, PRODUCTION EFFICIENCY, PRODUCTION FUNCTION, PRODUCTION INPUTS, PRODUCTION PROCESS, RESIDUAL RISK, RISK AVERSION, RISK NEUTRAL, RURAL LAND USE, SHARECROPPING, SITES, SOCIAL CAPITAL, SOIL EROSION, SOIL QUALITY, SUPPLIERS, TAXATION, TENANTS, TOPOGRAPHY, URBAN DEVELOPMENT, UTILITY MAXIMIZATION, VARIABLE INPUTS, WEALTH, WORKING CAPITAL,
Online Access:http://documents.worldbank.org/curated/en/2007/12/8880225/assessing-functioning-land-rental-markets-ethiopia
https://hdl.handle.net/10986/7556
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Summary:Although a large theoretical literature discusses the possible inefficiency of sharecropping contracts, the empirical evidence on this phenomenon has been ambiguous at best. Household-level fixed-effect estimates from about 8,500 plots operated by households that own and sharecrop land in the Ethiopian highlands provide support for the hypothesis of Marshallian inefficiency. At the same time, a factor adjustment model suggests that the extent to which rental markets allow households to attain their desired operational holding size is extremely limited. Our analysis points towards factor market imperfections (no rental for oxen), lack of alternative employment opportunities, and tenure insecurity as possible reasons underlying such behavior, suggesting that, rather than worrying almost exclusively about Marshallian inefficiency, it is equally warranted to give due attention to the policy framework within which land rental markets operate.

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