• 18 Aug 19
  • Posted by Huntington, Heather , Shenoy, Ajay
  • Agriculture

Insecure land tenure: the impact on farmers’ investment decision-making

How can poor farmers be encouraged to make the investments that will lift them out of poverty? This column reports evidence that while greater security of land tenure may give them peace of mind, its potential to drive investment is far from certain. The new studies raise doubts about whether recent multi-billion-dollar investments in tenure certification will be as transformative as previously thought.

Tenure security has long seemed the perfect marriage between economic theory and an actionable economic policy. Farmers are less willing to invest in their land, goes the theory, when they fear it may be stolen. By certifying their tenure through a legal title or official recognition, a government can reassure them that the fruits of their labor will be theirs to enjoy. Once secure in their rights, farmers will make the investments—building irrigation, applying fertilizer, planting nitrogen-fixing trees and so on—that will lift them out of poverty.

In line with economic theory, a small but prominent set of observational studies—in Ethiopia, Ghana, and Rwanda—links enhanced security of land tenure to greater investment. These studies leverage situations where certain farmers or certain parcels of land have been allocated land rights while others have not. All of the well-published observational studies find higher investment wherever land rights are more secure.

Motivated by this apparent consensus, international development organizations have spent vast sums on tenure reform initiatives across sub-Saharan Africa. The World Bank has put $1.5 billion towards titling and registry programs everywhere from Ghana to Nicaragua. USAID (the US Agency for International Development) has likewise put millions towards titling and certification programs in sub-Saharan Africa.

A few of these new programs have been rolled out as ‘randomized controlled trials. Much as doctors test drugs, economists use such trials to test social programs by comparing groups that are on average identical except, in this case, that the ‘treated’ group has been given land tenure.

To our knowledge, only two such randomized trials are complete, and neither finds effects as large as in the observational studies. Analysis of a program run by the government of Benin to regularize tenure in anticipation of distributing land titles finds statistically significant but small average effects on some measures of investment (tree-planting, perennial crops) and no effect on others (land fallowing, labor).

Meanwhile, the most recent trial of which we know—our own study in Zambia—finds that a USAID-funded tenure security intervention has had no statistically significant impact on any outcome highlighted by the prior body of research. By comparison, a more traditional extension program in the same context has had large effects on investment, suggesting that the barriers to investment are a lack of finance and technical knowledge rather than tenure insecurity.

The randomized interventions may show smaller impacts than the earlier non-randomized work for any of several reasons. Since governments often grant land titles to those with wealth and power, a non-randomized study would have to find a similarly privileged group that arbitrarily was not given a title for comparison—a difficult proposition.

Alternatively, governments and traditional authorities may be most likely to allow a tenure intervention only where informal rights are already strong and thus least valuable. It is also possible that there are observational studies that found no effect but were never published because editors were skeptical of results cutting against the apparent scientific consensus.

Why don't farmers react to land tenure as economic theory predicts? One possibility is that formal recognition of tenure just replaces informal recognition. Chiefs and fellow villagers may accept a household's tenure even though the government does not. Households may have never faced a serious risk of expropriation to begin with.

But our study finds that before the intervention, around 40% of households feared that their rights might be infringed in the coming years, and that this fear declined among households given tenure. Nevertheless, these same households were no more likely to invest.

It is also possible that standard economic theory does not capture accurately how farmers think about tenure insecurity and investment. In focus groups, households confirmed that they felt more secure in their rights, but that perception had no bearing on their decision to invest. Indeed, despite widespread perceptions of insecurity, 90% of households in our sample reported that a lack of formal documentation did not deter them from investing in their land.

Such a disconnect is difficult to explain with conventional theories of decision-making. It might be explained by insights from behavioral economics, but these theories have not yet been tested in connection with land tenure security, leaving many open questions. These open questions suggest that policy-makers should be cautious about tenure security interventions. Their impact is less well understood than it may at first appear.

One solution is to run randomized pilot studies of any intervention before scaling up and requiring researchers to pre-register the trial and its key outcomes to minimize the risk of publication bias. While tenure regularization may have great value in giving farmers peace of mind, its potential to drive investment is far from certain.

 

Authors:

Heather Huntington is the Associate Director of DevLab@Duke, Duke University.

Ajay Shenoy is an Assistant Professor at the Economics Department of the University of California, Santa Cruz.