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Land lease markets and agricultural efficiency: theory and evidence from Ethiopia

  • Pender, John L.
  • Fafchamps, Marcel

This paper develops a theoretical model of land leasing that includes transaction costs of enforcing labor effort, risk pooling motives and non-tradable productive inputs. We test the implications of this model compared to those of the “Marshallian” (unenforceable labor effort) and “New School” (costlessly enforceable effort) perspectives using data collected from four villages in Ethiopia. We find that land lease markets operate relatively efficiently in the villages studied, supporting the New School perspective relative to the other two models. Land contract choice is found to depend upon the social relationships between landlords and tenants, but differences in contracts are not associated with significant differences in input use or output value per hectare. We find that other household and village characteristics do affect input use and output value, suggesting imperfections in other factor markets. These results imply that interventions to improve the functioning of land lease markets are likely to be of little benefit for agricultural efficiency in the villages studied, whereas improvements in other factor markets may be more beneficial.

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Paper provided by International Food Policy Research Institute (IFPRI) in its series EPTD discussion papers with number 81.

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Date of creation: 2001
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Handle: RePEc:fpr:eptddp:81
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  1. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
  2. D. Gale Johnson, 1950. "Resource Allocation under Share Contracts," Journal of Political Economy, University of Chicago Press, vol. 58, pages 111.
  3. Otsuka, Keijiro & Chuma, Hiroyuki & Hayami, Yujiro, 1992. "Land and Labor Contracts in Agrarian Economies: Theories and Facts," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 1965-2018, December.
  4. Buchinsky, Moshe, 1994. "Changes in the U.S. Wage Structure 1963-1987: Application of Quantile Regression," Econometrica, Econometric Society, vol. 62(2), pages 405-58, March.
  5. Pender, John L. & Fafchamps, Marcel, 2001. "Land lease markets and agricultural efficiency: theory and evidence from Ethiopia," EPTD discussion papers 81, International Food Policy Research Institute (IFPRI).
  6. Gavian, Sarah & Ehui, Simeon, 1999. "Measuring the production efficiency of alternative land tenure contracts in a mixed crop-livestock system in Ethiopia," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 20(1), January.
  7. Sadoulet, Elisabeth & Fukui, Seiichi & Janvry, Alan de, 1994. "Efficient share tenancy contracts under risk: The case of two rice-growing villages in Thailand," Journal of Development Economics, Elsevier, vol. 45(2), pages 225-243, December.
  8. Shaban, Radwan Ali, 1987. "Testing between Competing Models of Sharecropping," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 893-920, October.
  9. Al, C. & Arcand, J.L. & Ethier, F., 1996. "Moral Hazard and Marshallian Inefficiency: Evidence from Tunisia," Cahiers de recherche 9605, Universite de Montreal, Departement de sciences economiques.
  10. Eswaran, Mukesh & Kotwal, Ashok, 1985. "A Theory of Contractual Structure in Agriculture," American Economic Review, American Economic Association, vol. 75(3), pages 352-67, June.
  11. Nottenburg, Carol & Pardey, Philip G. & Wright, Brian D., 2001. "Accessing other people's technology: do non-profit agencies need it? how to obtain it?," EPTD discussion papers 79, International Food Policy Research Institute (IFPRI).
  12. 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.
  13. Laffont, Jean-Jacques & Matoussi, Mohamed Salah, 1995. "Moral Hazard, Financial Constraints and Sharecropping in El Oulja," Review of Economic Studies, Wiley Blackwell, vol. 62(3), pages 381-99, July.
  14. Otsuka, Keijiro & Hayami, Yujiro, 1988. "Theories of Share Tenancy: A Critical Survey," Economic Development and Cultural Change, University of Chicago Press, vol. 37(1), pages 31-68, October.
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