Empirical Studies on Social Capital, Land and Credit Institutions
4 Has the reform permitted the emergence of a land market?
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4. Has the reform permitted the emergence of a land market? complementary analyses on the distributional impact of the reform
4.1 Introduction: efficiency and equity effects of land markets
One expected benefit of land registration and titling policies is that it enables the emergence of a land market (Deininger and Feder, 2001). A land market is said to have established when in a given area land is exchanged on a rental or purchase basis, at a market price that equate demand and supply. Both equity and efficiency gains in agricultural production are expected to arise from land markets when those function well (Otsuka, 2007). Land transactions are expected to lead to efficiency gains in the agricultural sector by enabling the transfer of land from less productive to more productive farmers. It also strengthens the labor market by freeing labor force. The emergence of a land market favors the establishment of an off-farm sector, by allowing farmers to sell land and join profitable activities in this sector. Finally, a functioning land market may strongly contribute to reduce poverty. Land and labor are indeed the two main assets owned by rural poor household, enabling them to value these resources on a market will have a positive impact on their wealth, raising the value of their asset, increasing their credit worthiness and risk bearing capacity (de Soto, 2000; Deininger, 2003).
The allocative efficiency and equity outcomes of the land sale and lease markets is...
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