Washington University in Saint Louis
Seminar 3 – 12:15
We assess the importance of land misallocation for productivity in agriculture using detailed household-level data from Malawi. The land market is largely underdeveloped in Malawi as the vast majority of land is transmitted by inheritance, almost none of the land is purchased with a title, and a very small portion of operated land is rented. Moreover, the land distribution in Malawi is concentrated at extremely small operational scales, with more than 70 percent of all farmers operating less than 2 acres of land (less than 1 hectare). We estimate the distribution of farm productivity controlling for land quality and temporary output shocks such as unexpected variations in rain. While the distribution of farm productivity shows substantial dispersion, land is spread evenly among farmers. The striking fact is that land size is unrelated to farm productivity. Under the counterfactual that land is efficiently allocated across existing farms, we find an increase in agricultural productivity of a 3-fold factor. The gains from factor reallocation are large even within narrowly dened location areas, skill groups, and land characteristics. Moreover, the gains in productivity are potentially larger as factors are reallocated away from agriculture to more productive uses. These results emphasize the importance of land market eciency for agricultural productivity and suggest that land misallocation may explain the large productivity diferences in agriculture across countries.