Land security, investment and tenure rights in Ethiopia

There is a strong relationship between land tenure and economic growth. If tenure is secure, farmers are more likely to make long-term investments in agricultural production. This in turn is good for the economy. But what happens when property rights are insecure?

Research from Oxford University, in the UK, and the World Bank, in the USA, compares perceptions of property rights amongst rural people in Ethiopia.

From 1976, all Ethiopian land was owned by the state, which gave cultivation rights to rural households. The right to cultivate land could sometimes be inherited, known as transfer rights. In 1991, the newly elected government promised to strengthen people’s land rights. This was reflected in a new constitution in 1996. Since then, there has been a confusing mixture of land redistribution in some regions, and land registration programmes in other regions.

An unexpected land reform in the Amhara region in 1997 and 1998 had a major influence on perceptions of land tenure in the rest of the country. Land was offered to demobilised soldiers and other groups and, contrary to the stated policy, compensation was not paid to the former owners.

In the following years, many farmers feared that they would also be subjected to land redistribution without compensation. This changed their perceptions about tenure security. In turn, these perceptions influenced whether they used their land for perennial cash crops, particularly coffee, eucalyptus and chat.

Coffee requires a significant long-term investment, as trees only start to produce three years after planting, and reach their full potential after eight years. Eucalyptus and chat are medium-term investments, producing yields after only a few years. Secure land rights are therefore an important factor in deciding to grow all three crops.

• In 1999, some farmers reported that they expected to lose land in the next few years, whilst others expected to gain land.
• Farmers who expected to gain land increased the amount of land used to grow coffee more than those who expected to lose.
• Households with a member in an influential political position felt that their right to transfer land to relatives or others, had increased.
• Households that perceived full transfer rights allocated an average of 4.5 percent more land to perennial crops than those that perceived no transfer rights.
• If all land currently cultivated were granted transfer rights, the total land area allocated to coffee would increase by about 22 percent.

This experience in Ethiopia demonstrates that long-term and transferable tenure rights are a significant incentive for farmers to invest in their land.

• Land titling or the privatisation of land are usually the best policies for providing these rights, but there may be other effective methods to achieve secure land rights.
• The credibility of any land tenure rights system matters as much as the exact structure of the tenure rights it offers.

Source(s):
'Land Rights, Power and Trees in Rural Ethiopia', Centre for the Study of African Economies Working Paper Series 2007-07, by Stefan Dercon and Daniel Ayalew, 2007 (PDF)

id21 Research Highlight: 6 October 2008

Further Information:
Stefan Dercon
Queen Elizabeth House
Oxford University
Mansfield Road
Oxford OX1 3TB
UK

Tel: +44 1865 281822
Fax: +44 1865 281801
Contact the contributor: stefan.dercon@economics.ox.ac.uk

University of Oxford, UK

Other related links:
‘Local institutions for managing the environment in Ethiopia’

‘How can people negotiate complex land rights in West Africa?'

‘Counting the cost of a cup of coffee’