Abstract
This article examines the effects of nonagricultural land use on agrarian organization and land reform in an economy characterized by limited credit and land rental markets. The nonagricultural demand for land, under credit constraint, generates a potential mismatch between the distribution of land and the distribution of farming skills. This disparity reduces the agricultural output if the land rental market is absent. A perfect land rental market is shown to determine the highest possible agricultural output. Policy implications from the model include, in addition to market improvements, the fact that small farmers rather than landless people should be the target of redistributive land reform programs.
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