Land Distribution, Incentives and the Choice of Production Techniques in Nicaragua
AbstractThe 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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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3141.
Date of creation: Jan 2002
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Other versions of this item:
- Oriana Bandiera, 2002. "Land Distribution, Incentives and the Choice of Production Techniques in Nicaragua," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 34, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Oriana Bandiera, 2002. "Land distribution, incentives and the choice of production techniques in Nicaragua," LSE Research Online Documents on Economics 3545, London School of Economics and Political Science, LSE Library.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
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