Untitled Land, Occupational Choice, and Agricultural Productivity

The prevalence of untitled land in poor countries helps explain the international agricultural productivity differences. Since untitled land cannot be traded across farmers, it creates land misallocation and distorts individuals' occupational choice between farming and working outside agriculture. I build a two-sector general equilibrium model to quantify the impact of untitled land. I find that economies with higher percentages of untitled land would have lower agricultural productivity; land titling can increase agricultural productivity by up to 82.5%. About 42% of this gain is due to eliminating land misallocation, and the remaining due to eliminating distortions in individuals' occupational choice.