AGRARIAN STRUCTURE: The Role of Land Policies

1
AGRARIAN STRUCTURE The Role of Land Policies

• Gershon Feder
• The World Bank

2
Where Do Property Rights Come From?

• Evolution with population growth trade
• To provide investment incentives w. higher
  population density
• To take advantage of trade and technological
  opportunities
• Imposition by outside forces
• To force independent smallholders into wage labor
• Or to extract surplus - supported by other
  distortions
• These two factors shape land relations
• Rapid dynamics with increasing land scarcity and
  land values
• Change in property rights regime often entailing
  conflict

3
Importance Rights Distribution

• Growth
• Insecure tenure undermines investment incentives
• It also hinders the functioning of markets
• Unequal distribution hampers long-term growth
• Poverty reduction
• Land is a key asset for the poor
• Gender biased allocation of rights
• Social peace and good governance
• Conflict and civil strife
• Discretionary bureaucratic intervention and
  corruption

4
Conceptual Issues

• Why public provision?
• Markets will emerge only if rights reasonably
  defined
• Cost advantages in public infrastructure
  establishment
• Public enforcement reduces transaction costs
• Key elements in property rights definition
• Duration needs to match horizon of investments
• Boundaries to be identified easily and at low
  cost
• Balancing private public interests

5
Impact of Secure Tenure

• Investment impact of more secure tenure
• Higher investment More than double in many cases
  
• Land values Significant increase (43-81)

6
Impact of Secure Tenure (Continued)

• Transferability adds considerably to this
• Even in situations, e.g. Ethiopia, Nicaragua
  where credit is not an option
• And, where credit market developed, facilitates
  credit access
• Though effect may be size differentiated
• Equity benefits
• Less spending on efforts to secure property
  rights welfare effect
• Improved local governance less manipulation by
  state
• Communal resource conservation and management

7
Multiple Ways To Increase Tenure Security

• Insecure tenure is pervasive
• Informality in peri-urban areas, extralegality in
  rural ones
• Households undertake investment to increase
  security direct demand
• Effect of legal situation and institutional
  environment
• Options on state lands
• Recognition of occupants and provision of
  long-term transferable leases
• Privatization if leases are not credible enough
  to facilitate investment
• Challenges in the distribution of public land for
  private use
• Preventing speculation while inducing efficient
  land use
• Protecting existing occupants

8
Agrarian Structure Conceptual Issues

• Basic factors shaping agrarian structure
• Often limited economies of scale in agricultural
  production
• Labor market imperfections inverse
  size-productivity
• Credit market imperfections Can outweigh these
  advantages
• Impact of initial allocations

9
Farm Size Distribution
10
Farm Size Distribution Growth
11
Land Markets

• Implications for rental vs. sales
• Rentals with low transaction cost high
  flexibility
• Sales can provide the basis for financial market
  development
• But will be more directly affected by
  imperfections Distress sales thin markets,
  segmentation, link to macro factors
• Mortgage based land acquisition by the poor
  difficult
• Sales markets generally not overcome biases in
  initial distribution
• Interventions in sales markets may reduce
  security
• Land ownership ceilings, if high enough may
  reduce speculation
• Transferability restrictions reduce credit
  access justified only temporarily

12
Land Rental Markets

• Possible advantages and issues
• Transfer to more productive producers
  participation in non-farm
• Consumption smoothing and accumulation of
  experience
• Effort provision and contract choice Fixed rent,
  wage labor, sharecrop
• Investment disincentive of short term contracts
• Many governments use this to restrict transfers
  in these markets
• Incidence and impact of rental markets
• Very important (including long-term contracts) in
  developed countries
• Particularly important in situations of rapid
  transition growth
• Generally transfer land to the poor and efficient
  
• They do so more efficiently than government
  redistribution
• Policy constraints can undermine activity in
  rental markets
• If property rights are secure TC low, they can
  develop rapidly

13
Land Reform and Distribution

• Conceptual vs. empirical picture
• Positive social and productivity impact in Asia
  and some African countries
• But incomplete and costly in most of Latin
  America
• Limited impact on productivity poverty because
  of missing complementary investments, services
• Implications
• Land distribution as a strategy to provide access
  to facilitate use of assets
• Different approaches can complement each other
• Complementary investment, credit output market
  access
• Transparent participatory process political
  support, fiscal feasibility

14
Governments Role

• Government is provider of tenure security
• Clear legislation, efficient administration
• Prioritize areas for registration and
  regularization
• Effective dispute resolution system
• State ownership of land offers opportunities but
  entails risks
• Often ineffective use of state land
• Devolution of use rights or ownership can improve
  use
• Socially-oriented distribution
• Commercially-oriented concessions the risks
• Land use zoning
• Justified where externalities exist
• Predictable transparent rule instead of
  bureaucratic discretion
• Much more justified in urban than in rural areas