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Property rights in a very poor country : tenure insecurity and investment in Ethiopia

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  • Ali, Daniel Ayalew
  • Dercon, Stefan
  • Gautam, Madhur

Abstract

This paper provides evidence from one of the poorest countries of the world that the property rights matter for efficiency, investment, and growth. With all land state-owned, the threat of land redistribution never appears far off the agenda. Land rental and leasing have been made legal, but transfer rights remain restricted and the perception of continuing tenure insecurity remains quite strong. Using a unique panel data set, this study investigates whether transfer rights and tenure insecurity affect household investment decisions, focusing on trees and shrubs. The panel data estimates suggest that limited perceived transfer rights, and the threat of expropriation, negatively affect long-term investment in Ethiopian agriculture, contributing to the low returns from land and perpetuating low growth and poverty.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4363.

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Date of creation: 01 Sep 2007
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Handle: RePEc:wbk:wbrwps:4363

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Keywords: Common Property Resource Development; Forestry; Municipal Housing and Land; Rural Development Knowledge&Information Systems; Urban Housing;

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References

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  1. Place, Frank & Otsuka, Keijiro, 2001. "Population, Tenure, and Natural Resource Management: The Case of Customary Land Area in Malawi," Journal of Environmental Economics and Management, Elsevier, vol. 41(1), pages 13-32, January.
  2. Lanjouw, J.O. & Levy, P.I., 1998. "Untitled: A Study of Formal and Informal Property Rights in Urban Ecuador," Papers 788, Yale - Economic Growth Center.
  3. Gavian, Sarah & Ehui, Simeon, 1999. "Measuring the production efficiency of alternative land tenure contracts in a mixed crop-livestock system in Ethiopia," Agricultural Economics, Blackwell, vol. 20(1), pages 37-49, January.
  4. 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.
  5. Feder, Gershon & Feeny, David, 1991. "Land Tenure and Property Rights: Theory and Implications for Development Policy," World Bank Economic Review, World Bank Group, vol. 5(1), pages 135-53, January.
  6. Holden, Stein & Yohannes, Hailu, 2001. "Land redistribution, tenure insecurity, and intensity of production: a study of farm households in southern Ethiopia," CAPRi working papers 21, International Food Policy Research Institute (IFPRI).
  7. Hanan G. Jacoby & Guo Li & Scott Rozelle, 2002. "Hazards of Expropriation: Tenure Insecurity and Investment in Rural China," American Economic Review, American Economic Association, vol. 92(5), pages 1420-1447, December.
  8. Shiferaw, Bekele & Holden, Stein, 1999. "Soil Erosion and Smallholders' Conservation Decisions in the Highlands of Ethiopia," World Development, Elsevier, vol. 27(4), pages 739-752, April.
  9. Pinckney, Thomas C & Kimuyu, Peter K, 1994. "Land Tenure Reform in East Africa: Good, Bad or Unimportant?," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 3(1), pages 1-28, April.
  10. Brasselle, Anne-Sophie & Gaspart, Frederic & Platteau, Jean-Philippe, 2002. "Land tenure security and investment incentives: puzzling evidence from Burkina Faso," Journal of Development Economics, Elsevier, vol. 67(2), pages 373-418, April.
  11. Jean O. Lanjouw & Philip I. Levy, 1998. "Untitled: A Study of Formal and Informal Property Rights in Urban Ecuador," Working Papers 788, Economic Growth Center, Yale University.
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Citations

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Cited by:
  1. Deininger, Klaus W. & Ayalew, Daniel & Yamano, Takashi, 2006. "Legal Knowledge and Economic Development: The Case of Land Rights in Uganda," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25431, International Association of Agricultural Economists.
  2. Deininger, Klaus, 2010. "Towards sustainable systems of land administration: Recent evidence and challenges for Africa," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 5(1), September.
  3. Hanjra, Munir A. & Ferede, Tadele & Gutta, Debel Gemechu, 2009. "Pathways to breaking the poverty trap in Ethiopia: Investments in agricultural water, education, and markets," Agricultural Water Management, Elsevier, vol. 96(11), pages 1596-1604, November.
  4. Honohan, P. & Beck, T.H.L., 2007. "Making finance work for Africa," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125420, Tilburg University.
  5. Matz, Julia Anna, 2013. "Ethnicity, Marriage and Family Income," Discussion Papers 154935, University of Bonn, Center for Development Research (ZEF).
  6. Fenske, James, 2011. "Land tenure and investment incentives: Evidence from West Africa," Journal of Development Economics, Elsevier, vol. 95(2), pages 137-156, July.
  7. Jin, Songqing & Deininger, Klaus, 2009. "Land rental markets in the process of rural structural transformation: Productivity and equity impacts from China," Journal of Comparative Economics, Elsevier, vol. 37(4), pages 629-646, December.

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