MONOPOLISTIC RENT DETERMINATION IN UNDERDEVELOPED RURAL AREAS*

Abstract

SUMMARYEconomists are often puzzled by the fact that impoverished tenants in poor countries are frequently crowded on to inadequate holdings, while much immediately available land remains unused. This paper sets out to explain this phenomenon in terms of the monopoly or oligopoly power of the landlord class. Individual landowners with this power will find it in their interest to rent out land only up to the point at which its annual marginal value product equals the annual outlay involved in bringing it into use. The latter can be expressed as the yearly interest payments on the original investment (clearing, levelling, and draining charges etc.) plus some annual maintenance costs.More terrain may be cultivated if the monopoly power of landlord can be broken. This would mean that land would be employed up to a level at which the value of its marginal product, as opposed to its marginal value product, equalled the annual cost of bringing it into use. In addition, the VMP and MVP curves on a particular landlord's holdings would be rendered more rent‐elastic if their produce could be sold in wider national and international markets. This too would bring more land under the plough. Sharp price declines associated with increased production in isolated areas may be an important reason why monopolistic landowners keep much of their land unused. The author admits that this is but one among a number of alternative explanations, but he asks that it be given equal consideration with the others. Statistical data pertaining to the South American republic of Ecuador are used in support of the argument.