Contract Duration under Incomplete Land Ownership Rights: Empirical Evidence from Rural Ethiopia
AbstractUsing the land tenure system in Ethiopia, where all land is state-owned and only farm households have usufruct rights, as a case study, we assessed the links between land owners’ tenure insecurity, associated behavioral factors, and contract length. In this paper, we analyze these links with survey data of rural households in the Amhara National Regional State of Ethiopia. The empirical strategy follows a hazard function model employed in duration data analyses and investigates the fitness of the data to the alternative exponential and Weibull functional forms. The results show that landlords’ risk aversion increases the duration of contracts, which is in line with the reverse tenancy argument that landlords’ risk preferences affect land-contract decisions. The findings of the study also indicate that tenure insecurity is a critical factor in the nature and length of contracts; hence, policies should aim to reduce landlords’ frustrations regarding future land redistribution by the state. An important implication of the results is that secure tenure systems can reduce the disincentives from tenure insecurity due to uncertainty about contract duration and thereby enhance tenants’ welfare. Longer-term and stable contracts can improve the land rental market. In addition, the impact of risk preferences points toward the importance of poverty in the functioning of the land rental market.
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Bibliographic InfoPaper provided by Resources For the Future in its series Discussion Papers with number dp-12-09-efd.
Date of creation: 24 Jul 2012
Date of revision:
contract length; tenure insecurity; risk and rate of time preferences; Ethiopia;
Find related papers by JEL classification:
- D2 - Microeconomics - - Production and Organizations
- Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
- Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
This paper has been announced in the following NEP Reports:
- NEP-AFR-2013-05-11 (Africa)
- NEP-AGR-2013-05-11 (Agricultural Economics)
- NEP-ALL-2013-05-11 (All new papers)
- NEP-DEV-2013-05-11 (Development)
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