Land tenure, population, and long-run growth

Abstract

This paper brings together the development literature on land tenure with current research on population and long-run growth. Landowners make a decision between fixed rent, fixed wage, and sharecropping contracts to hire tenants to operate their land. The choice of tenure contract affects the share of output going to tenants, and within a simple unified growth model, this affects the relative price of food and therefore fertility. Fixed wage contracts elicit the lowest fertility rate and fixed rent contracts the highest, with sharecropping as an intermediate case. The implications of this for long-run growth depend on the assumptions one makes about scale effects in the aggregate economy. With increasing returns to scale, as in several models of innovation, fixed rent contracts imply higher growth through a market size effect. Without such increasing returns, though, fixed rent contracts reduce output per capita through a depressing effect on accumulation.