The arrival of European colonists often brought rapid change from traditional to private land ownership. In some cases land was taken by force (Latin America),
4while in others traditional leaders were pressured or paid to give some land to colonists (Africa). “Modern” land ownership systems usually give land owners the following rights: •Right to rent their land to someone else •Right to sell (or bestow) land to someone else •Right to use the land as collateral to get a loan •Right to remove people from the land regardless of any tradition rights pertaining to those people The main benefits of a system of property rights are: 1.Greater incentives for productive investments and (some kinds of) environmental protection. There is much evidence for the investment effect. 2.Ease of transfer use rights (i.e. rent or sell) to others (including to people outside of the “tribe”) who may be more efficient producers. Ability to sell land gives another incentive to invest. 3.Ability to use the land as collateral for credit (assuming lenders can seize land in case of default)
5The two main disadvantages/costs are: 1.Administrative/logistical costs: mark boundaries, keep records, enforce rights & settle disputes. 2.Risk of becoming landless (loss of “safety net”). Deininger & Feder stress the efficiency advantage of having the person who works on or invests in the land be the “residual claimant” (the person who has the right to any resulting increases in production). III. Ownership & Rental Patterns in “Modern” SystemsThe details of how private land ownership works has a big impact on the size of the advantages & disadvantages. Farm size and farm efficiency.If the production function for agricultural products is constant returns to scale (CRS), the size of farms would be irrelevant for purposes of efficient production, so the size could be set to obtain some other objective (e.g equity). Returns to scale is not just a property of production functions but also depends on the production method. Usually it is difficult to monitor the productivity of hired laborers, and theoretical models show that it is more efficient for labor to come from the households that own the land, or at least are the residual claimants to the land (e.g. renters paying a fixed rent).
6For almost all crops, studies show that, once labor incentives are accounted for, there are no increasing returns to scale. A few exceptions exist: sugar cane, bananas and tea. Thus government “discouragement” of large farms and “encouragement” of small, family farms does not lead to inefficiencies in production. In reality, land ownership is often very unequal. This occurs primarily because households with little or no land have neither money to purchase land nor access to credit. There are also fixed transaction costs for all plots, regardless of size; this discourages sales of small plots. Some government policies favor land ownership by wealthy households (e.g. tax breaks for landowners, they apply only to those wealthy enough to be taxed).
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- Winter '20
- Land, land ownership