Communal Land and Agricultural Productivity

Communal land tenure regimes are perceived as an obstacle to agricultural productivity in Sub-Saharan Africa. Our general equilibrium selection model suggests that such land tenure arrangements can indeed lower nominal productivity in agriculture relative to non-agriculture, by some 25%. Real agricultural productivity, employment and GDP, however, are only marginally affected. Highly distortionary policies need not have substantial bite when individuals strategically respond and cross-sectoral terms of trade adjust strongly. Our model, calibrated to Ethiopia, predicts that at given prices 62% of farmers would leave farming if tenure were secured, yet only 9% actually switch sectors after factoring in price adjustments.