Land Rental in Ethiopia: Marshallian Inefficiency or Factor Market Imperfections and Tenure Insecurity as Binding Constraints?

Klaus Deininger, Daniel Ayalew Ali and Tekie Alemu

No 9860, 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: Although a large theoretical literature discusses the possible inefficiency of sharecropping contracts, empirical evidence on this phenomenon has been ambiguous at best. Household level fixed-effect estimates from about 8,500 plots operated by households who own and sharecrop land in the Ethiopian highlands provide support for the hypothesis of Marshallian inefficiency. At the same time, a factor adjustment model suggests that the extent to which rental markets allow households to attain their desired operational holding size is extremely limited. Our analysis points towards factor market imperfections (no rental for oxen), lack of alternative employment opportunities, and tenure insecurity as possible reasons underlying such behavior, suggesting that, rather than worrying almost exclusively about Marshallian inefficiency, it is equally warranted to give due attention to the policy framework within which land rental markets operate.

Keywords: Land; Economics/Use (search for similar items in EconPapers)
Pages: 26
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea07:9860

DOI: 10.22004/ag.econ.9860

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