Working Paper: NBER ID: w24034
Authors: Chaoran Chen; Diego Restuccia; Ral Santaeulliallopis
Abstract: We assess the effects of land markets on misallocation and productivity both empirically and quantitatively. Exploiting variation from a land certification reform across time and space in Ethiopia, we find that certification facilitates rentals and improves agricultural productivity. We calibrate a quantitative macroeconomic model with heterogeneous household farms facing institutional costs to land markets using the micro panel data. The effect of a counterfactual reallocation from no rentals to efficient rentals increases zone-level agricultural productivity by 43 percent on average. While our estimated institutional costs are strongly associated with land certification across zones, there are nontrivial residual frictions to rental market activity, implying that land certification only partially captures the overall effects of rentals. A full certification reform accounts for just one-fourth of the overall productivity gains from land rentals. This result highlights the importance of comprehensive reforms alleviating frictions to land transactions beyond the granting of certificates.
Keywords: land markets; agricultural productivity; resource allocation; land certification; Ethiopia
JEL Codes: E02; O11; O13; O55; Q1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Land Certification (Q15) | Land Rentals (Q15) |
| Land Rentals (Q15) | Agricultural Productivity (Q11) |
| Land Certification (Q15) | Agricultural Productivity (Q11) |
| Land Certification (Q15) | Improvements in Resource Allocation (D61) |
| Land Certification Reform (Q15) | Productivity Gains (O49) |