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The Effects of Land Markets on Resource Allocation and Agricultural Productivity

Author

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  • Diego Restuccia
  • Chaoran Chen
  • Raul Santaeulalia-Llopis
Abstract
We assess the effects of land markets on misallocation and productivity by exploiting effective variation in land rentals across time and space arising from a large-scale land certifcation reform in Ethiopia, where land remains owned by the state. Our main fnding 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 and a calibrated quantitative macroeconomic framework with heterogeneous household-farms that replicates|without targeting|the empirical effects, an outcome that externally validates our model. The empirical effects are nonlinear|impacting more farms farther away from effcient operational scale, consistent with our theory. Further, counterfactual model experiments suggest that the land reform reduces income inequality, is relatively scalable and explains a sizeable proportion of the full extent of misallocation. Additional insights on the role of (in)formality in land markets and its effects on technology adoption are provided

Suggested Citation

  • Diego Restuccia & Chaoran Chen & Raul Santaeulalia-Llopis, 2020. "The Effects of Land Markets on Resource Allocation and Agricultural Productivity," Working Papers tecipa-660, University of Toronto, Department of Economics.
    • Handle: RePEc:tor:tecipa:tecipa-660
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    More about this item

    Keywords

    Land markets; rentals; effects; misallocation; productivity; inequality; micro data; quantitative macro; informal markets; technology; fertilizers;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land

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