Land tenure, investment, land markets, off-farm employment, and rural welfare in Ethiopia

Doctoral Thesis


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University of Cape Town

Ethiopia is one of the few countries in Africa to implement large-scale land titling programmes aiming to improve land related-investments. Since 1995, Ethiopia also has partially liberalised rural land rental markets with the aim of improving the functioning of these markets. Evidence on whether these reforms resulted in improved land access by the poor and increased land-related investments though are scarce and inconclusive. This thesis investigates empirically the relationship between land tenure issues on one hand, and land-related investments and the functioning of rural land and labour markets on the other. It also analyses the relationship between participation in land rental markets and household welfare. Detailed descriptive data analysis and various econometric models were used to examine these issues. The data source for the study is the Ethiopian Rural Household Survey (ERHS), which consists of a panel of 1477 sample households covering four regions in the country. Findings from the study show that factor, input, and financial markets are poorly developed in rural Ethiopia. In addition, land title ownership does not give farmers additional rights other than the rights provided in the federal and regional legislation. This has particular ramifications. For instance, despite having a land title, farmers in Ethiopia are not allowed by law to sell or use their land as collateral in credit markets. There are also various limitations on land rental transactions. These findings suggest that the preconditions for economic effectiveness of land titling are not satisfied in the case of Ethiopia. Furthermore, in contrast to earlier studies, this study finds no significant link between farmers' perceptions of tenure insecurity and their land-related investment and factor market participation decisions. Instead, it establishes that poverty in faming resources and market failures in the credit and factor markets are the major binding constraints that adversely affect farmers' land-related investment and factor market participation decisions in rural Ethiopia. The results reveal that asset rich households were more likely to get access to more land and labour through factor markets, and they were also more likely to invest on their land, while female-headed and/or asset poor households were more likely to lease out their land and remain poor. The findings of this study do not necessarily suggest that the existing land tenure system in Ethiopia is satisfactory for farmers' intensification efforts. It is widely argued that past and current land polices in the country have led to reduced and fragmented land size holdings in rural areas. As a result, there is limited room for farm intensification. For instance, data from this study show that among sample households who did not grow tree crops on their land, 40% of them reported that land shortage is the first major problem. In this regard, the existing land tenure system can be equally restrictive for most farmers. Therefore, the results of the study suggest that, without reforming the existing land policy and addressing problems in factor and credit markets, land titling is expected to play a very limited role in improving tenure security, investment, and land access for the rural poor.

Includes bibliographical references