Research on Land Markets in South Asia: What Have We Learned?

Abstract

The authors review the literature on land markets in South Asia to clarify what's known and to highlight unresolved issues. They report that: (1) We have a good understanding of why sharecropping persists and why it can be superior to other standard agricultural contracts. We have less understanding of what determines the relative efficiency of sharecropping in different environments and why other apparently superior contractual relationships are rare. (2) Insecure rights to land adversely affect production and investment incentives in areas outside of South Asia, but in South Asia strong evidence linking investment and rights to production is scarce. (3) An inverse relationship between farm size and output per unit area is a recurrent feature in data from South Asia, apparently related to land-labor interactions. (4) Although small farms seem to be more efficient than large ones, small farmers have trouble raising their profitability and enlarging their holding, largely because of credit constraints, but also because of poverty and policy that discriminates against them. (5) Misguided land reform in the past has made tenancy unattractive to landowners, so large capital-intensive farms have developed. Political economic analysis is needed to explain the failure of past land reform, as well as distortions in agricultural input and output markets in (6) South Asia. Land fragmentation (as distinguished from farm size) has caused productivity losses. Those losses have not been quantified and the reasons fragmentation persists are poorly understood. (7) Transaction costs are a significant impediment to functioning land markets. In South Asia, transfers of land rights are complicated by lack of explicit title to land, and by informal and customary rights. (8) One pressing research problem is gender discrimination, an important factor in land market imperfections -especially (within the household) the separation of land management and its control. Research needs include more systematic regional comparisons, the use of more panel data, and an investigation of how agricultural productivity is affected by gender problems and land fragmentation.