Contract Duration under Incomplete Land Ownership Rights: Empirical Evidence from Rural Ethiopia

Abebe D. Beyene, Mintewab Bezabih and Zenebe Gebreegziabher

RFF Working Paper Series from Resources for the Future

Abstract: Using 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.

Keywords: contract length; tenure insecurity; risk and rate of time preferences; Ethiopia (search for similar items in EconPapers)
JEL-codes: D2 Q12 Q15 (search for similar items in EconPapers)
Date: 2012-07-24
New Economics Papers: this item is included in nep-afr, nep-agr and nep-dev
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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