Abstract
The study determines whether there are causal influences amongst the decision to apply for leasehold land right, investment, and livestock farm productivity in the Kavango West Region of Namibia. Various econometrics models have been used to model these relationships in the literature. However, there is a growing concern that methods which do not explicitly account for the endogeneity of regressors and which are used to investigate the relationship between property rights and the economic activities on agricultural farms often produce bias estimates that are inefficient and inconsistent. This study applied an instrumental variable (IV) regression to a survey data of 510 farmers to correct for endogeneity. A test of endogeneity of tenure security, investment, and farm productivity in the various models show that tenure security is exogenous to farm investment decision and farm productivity. On the other hand, farm investment decision was found to be exogenous to farm productivity, which implies that farmers make investment decisions given a secure tenure right that enhances their productivity on the farm. Overall, there was no evidence to support reverse causality in any of the tests. These findings highlight the importance of secure property rights as being a stimulus for increased agricultural investment and productivity. Key words: Property right, tenure security, endogenous, exogenous, investment.
Highlights
Since Namibia gained independence in 1990, the issue of land reform has been the government’s top priority, aimed at redressing the skewed land ownership orchestrated by the apartheid government
Simultaneous equation models (SEM) have been widely applied in the literature to model the relationship between farm investment and productivity given that investors have the potential to obtain credit under secure property rights
The theoretical implication for the use of Simultaneous Equation Models (SEMs) in this regard is that there might be a potential causal influence amongst the variables: tenure security, farm investments, and farm productivity, which is due to endogeneity amongst the variables
Summary
Since Namibia gained independence in 1990, the issue of land reform has been the government’s top priority, aimed at redressing the skewed land ownership orchestrated by the apartheid government. The registration programme serves to enhance tenure security for beneficiaries, thereby giving them legal documentary proof to the land, preventing conflicts arising between landowners and intruders, and conferring on them the opportunity to invest Investments in this regard include those that facilitate productivity, such as fencing, boreholes, farmhouses and electricity generators. In 2007, some parts of Namibia, namely the Kavango, Ohangwena, Zambezi, Omusati, and Omaheke were designated and gazetted as small-scale commercial farming areas in the communal areas, with the aim of transforming farmers in these areas from communal farmers into commercial livestock farming entrepreneurs In this regard, the study empirically investigates leasehold land ownership in the communal area, using various econometric tests. Region (North of the Veterinary Condor Fence (NVCF)) of Namibia, where no known evidence exists of a similar study In this region, leasehold rights are held by the private communal farmers, who are often referred to as Small-Scale Commercial Farmers (SSCFs). The study investigates the circumstances of such occurrences and the effect they may have on investment and productivity in the selected region
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