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Land Distribution, Incentives and the Choice of Production Techniques in Nicaragua

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  • Bandiera, Oriana

Abstract

The distribution of property rights has a strong impact on output when, due to the non-contractibility of some inputs, market contracts do not yield efficient outcomes. In this Paper I analyse how the distribution of land rights affects the choice of both contractible techniques – such as crop mix or irrigation – and non-contractible effort when these are complements in production. I present evidence from rural Nicaragua suggesting that farmers are more likely to grow effort-intensive/highly profitable crops on the plots they own rather than on the plots they rent. I consider two theoretical arguments that illustrate why property rights might matter. The first relies on the fact that the agent who chooses effort is subject to a limited liability constraint, the second that the owner cannot commit to output-contingent contracts. In both models the choice of technique might be inefficient, regardless of the distribution of property rights. The efficiency loss is, however, lower when the farmer owns the land. Further empirical investigation shows that, in this context, the inability to commit seems to be the main source of inefficiency.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3141.

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Date of creation: Jan 2002
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Handle: RePEc:cpr:ceprdp:3141

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Keywords: agricultural productivity; asymmetric information; crop choices;

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  1. Current, D. & Lutz, E. & Scherr, S., 1995. "Costs, Benefits, and Farmer Adoption of Agroforestry. Project Experience in Central America and the Caribbean," Papers 14, World Bank - The World Bank Environment Paper.
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  3. Besley, Timothy, 1995. "Property Rights and Investment Incentives: Theory and Evidence from Ghana," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 903-37, October.
  4. Oriana Bandiera, 1999. "On the Structure of Tenancy contracts: Theory and Evidence fron 19th Century Rural Sicily," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 19, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
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Cited by:
  1. Luis H.B. Braido, 2005. "Evidence on the Incentive Properties of Share Contracts," Development and Comp Systems 0508013, EconWPA.
  2. de Laiglesia, Juan R., 2005. "Investment and credit effects of land titling and registration:," Proceedings of the German Development Economics Conference, Kiel 2005 10, Verein für Socialpolitik, Research Committee Development Economics.

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