Property rights in a very poor country: tenure insecurity and investment in Ethiopia

Abstract

This article provides evidence from one of the poorest countries in the world that the institutions of property rights matter for efficiency, investment, and growth. With all land state-owned, the threat of land redistribution never appears far off the agenda. Land rental and leasing have been made legal, but transfer rights remain restricted and the perception of continuing tenure insecurity remains quite strong. Using a unique panel data set, this study investigates whether transfer rights and implied tenure insecurity affect household investment decisions, focusing on trees and shrubs. The panel data estimates suggest that limited perceived transfer rights negatively affects the long-term investment in Ethiopian agriculture, contributing to the low returns from land and perpetuating low growth and poverty.JEL classifications: O13, O17, Q15

Land tenure and investment incentives: Evidence from West Africa

“…, Alemu (1999), Ali et al (2007), Amsalu and de Graaff (2007), Anim (1999), Anley et al (2007), Baland et al (1999), Bekele and Drake (2003), Benin and Pender (2001), Besley (1995), Brasselle et al (2002), Brück (2003), Clay et al (1998), , , Deininger and Jin (2006), Deininger et al (2003), Dercon and Krishnan (2010), Dube (2009), Gavian and Fafchamps (1996), , Gebremedhin and Swinton (2003), Goldstein and Udry (2008), Gray and Kevane (2001), Hagos and Holden (2006), Hayes et al (1997), Holden and Yohannes (2002), Holden et al (2009b), Jacoby and Minten (2007), Kabubo-Mariara (2005, Kabubo-Mariara et al (2006), Kazianga and Masters (2002), Matlon (1994), Moor and Nieuwoudt (1998), Nkonya et al (2004), Otsuka et al (2003), Pender and Fafchamps (2005), Place (1995), Place et al (1995), Place and Hazell (1993), Otsuka (2001, 2002), Quisumbing and Otsuka (2001), Roth et al (1994a,b), Sakurai (2006), Shiferaw and Holden (1998), …”

Ethiopia: Natural Resource Exploitation and Emerging Investors1

“…While the program's resulting certificates had some positive effects on tenure security and other outcomes, such as landrelated investment, a certain level of land insecurity continued. Given the growing levels of landlessness in certain regions, Ethiopian landholders worried that future land redistributions would occur (Ali, Dercon, & Gautam, 2007). They also realized that even with a land certificate in hand, the government could still legally expropriate land when it deemed necessary (Rahmato, 2011).…”

“…Livelihoods of Ethiopian farmers and pastoralists, which account for over 80% of the population (Ali et al, 2007), remain precarious due to a lack of transformation in the smallholder agricultural sector. Since 2016, droughts across the country have caused 10.2 million Ethiopians to require emergency food relief (World Food Program, 2016), up roughly 65% from the 6.2 million Ethiopians in need in 2009 (Bues & Theesfeld, 2012, p. 269).…”

Ethnicity, Marriage and Family Income

“…due to state ownership (Crewett, Bogale, and Korf 2008;Ali, Dercon, and Gautam 2011). Livestock, on the other hand, does not exhibit a statistically significant relationship with the key explanatory variable eth dif f when other factors are controlled for.…”

“…The statistically significant associations of the first two are not surprising as they are also indicators of material well-being of different strengths, the latter is not due to the inability of individuals to sell land (Crewett, Bogale, and Korf 2008;Ali, Dercon, and Gautam 2011). While the age gap between spouses exhibits evidence of a negative relationship with asset holdings, the duration of the marriage and the wealth of the head's parents upon marriage do not exhibit statistically significant coefficients.…”