Abstract: The growth of rural land rental markets is often taken as a virtuous component of an African structural transformation process, by facilitating access to land by efficient but land-constrained farmers. Recent empirical work has generally supported this view. However, one of the shortcomings is that nearly all studies severely underreport activities of landlords, as compared with tenants. Failure to fully capture the landlord side of the rental market at best leaves out important information about the landlords’ intentions, and at worst biases any results and conclusions that are drawn from such studies. The present paper estimates the efficiency, equity, and investment returns to land renting using a matched tenant-landlord survey of smallholder farm households in four districts (two rural, and two peri-urban) of Malawi. Our matched tenant-landlord sample allows us to use pairwise Fixed Effects to control for unobservable characteristics of tenant-landlord pairs that may otherwise bias model estimation. Results suggest that land rental markets do facilitate efficiency, as households that have higher farming ability and education are more likely to rent in land compared to those who rent out. In addition, we find that rental markets seem to encourage equity as households with more land ex ante are more likely to rent to those with less land. However, our study also identifies some important caveats to these otherwise positive results. First, we note that tenant households in our sample are wealthier than their landlord counterpart on average in all dimensions other than landholding (i.e. value of durable and livestock assets, off-farm income, education levels). In addition, most landlord households report the motive for renting out their land as either the need for immediate cash, or the lack of labor and/or capital to cultivate the plot that was rented out. While we find evidence that tenants farm more intensively than landlords and non-renters, the nature of tenants’ productivity investments is mostly short term, i.e. chemical fertilizer and herbicides. Relatedly, we find that rented-in plots receive fewer fertility enhancing investments, such as use of organic manure, than owner-operated plots. Thus, it appears that in Malawi the majority of landlords are “stress renting” their land to tenants who seek short-term yield gains, potentially at the expense of longer-run soil health. This raises the question: if soil fertility declines on rented in plots, can the efficiency gains associated with land rental be maintained in the future? Our work suggests that this is an important trade-off to consider from a land policy perspective.
Presenter:
- Jacob Ricker-Gilbert, Professor of Agricultural Economics, Purdue University
Moderator:
- Joachim De Weerdt, Country Program Leader, IFPRI-Malawi
Date & Time:
- 16 February 20221 @ 3:30 pm to 4:30 pm (CAT)
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