Communal Land and Agricultural Productivity

This paper quantifies the aggregate impact of communal land tenure arrangements such as those that predominate in Sub-Saharan Africa. For this we use a general equilibrium selection model featuring agents that are heterogeneous in agricultural and non-agricultural skills. A fraction of aggregate land is communal and there are policy rules governing its expropriation and redistribution. These create operational frictions by subjecting rented-out communal land to the risk of expropriation. They also create occupational frictions as agricultural employment lowers the risk of expropriation as well as raises the prospect of communal land accumulation. The quantification of the model is based on policies deduced from Ethiopia. It reveals that communal land decreases productivity in agriculture relative to non-agriculture roughly by 20% in nominal and 10% in real terms. Employment and GDP, however, are not substantially affected. That serves as a reminder that ostensibly highly distortionary policies need not have substantial bite when individuals strategically adjust to them.