Submissions Accepted for Presentation at the World Bank Land Conference 2024

Do land market frictions cause misallocation in agriculture? In a field experiment in Western Kenya, we randomly subsidize owners to rent out land. Transferring cultivation rights to renters increases output and value added on the plots, consistent with imperfect land markets and misallocation, and induced rentals persist after the subsidy ends. Additional analysis provides insights on the magnitude and nature of land frictions -- which include search, risks, and learning\textemdash and on the sources of gains from trade -- which include differences between owners and renters in crop choices, productivity, and financial market constraints, but not in labor constraints.

We exploit substantial variation in land-market institutions across Indian states and detailed micro household-level panel data to assess the effect of distortions in land rental markets on agricultural productivity. We provide empirical evidence that states with more rental-market activity feature less misallocation and reallocate land more efficiently over time. We develop a model of heterogeneous farms and land rentals to estimate land-market distortions in each state. Land rentals have substantial positive effects on agricultural productivity: an efficient reallocation of land increases agricultural productivity by 38 percent on average and by more than 50 percent in states with highly distorted rental markets. Both farm and state-level land market distortions are quantitatively important, with state-level wedges accounting for a significant fraction of rental market participation differences across states. Land market distortions contribute about one-third to the large differences in agricultural total factor productivity across Indian states.

I investigate how government restrictions on land markets impact the agricultural sector, and assess whether such restrictions can curb distortions that stem from the presence of market power. To do so, I develop a general-equilibrium model in which large landholders exert market power in both land and labor markets, and where there are limits on land accumulation. Restrictions reduce the inefficiencies arising from market power, but also hinder productive reallocation, with the net effect on productivity depending on initial levels of land concentration.

I empirically test the model’s predictions by estimating how a law imposing municipality-specific limits on landholdings in Colombia affected productivity, land concentration, and agricultural labor markets. I find that restrictions led to permanent reductions in productivity with modest reductions in land inequality. However, restrictions increased both agricultural workers’ earnings and the employment share in agriculture, suggesting they were beneficial for landless laborers by reducing labor market power.

I study the effects of female land inheritance on economic productivity in Ghana, by examining variation in land inheritance patterns across ethnic groups. In patriliny, land passes from fathers to sons; in matriliny, the customs are more flexible, and allow for both male and female inheritance. Male and female inheritance generate asymmetric impacts on the allocation of labor: when women inherit land, men exit agriculture, work for a wage, and receive more schooling. However, because women have more limited outside options, when men inherit, women work on their husband’s plots, and supply less total labor. The net effect of female inheritance is improved economic productivity, operating through the channel of higher male labor productivity. Men pushed to leave farming earn a non-agricultural wage premium, and are better rewarded for their human capital. This does not come at the expense of lower farm productivity, which is equal across the two regimes.