Research into land markets in developing countries highlights the ways in which a better-functioning and more equitable market could benefit both farmers and communities.
The problem
It’s difficult to farm productively on small, fragmented plots of land. The input costs are higher and there are few options to improve productivity through technology. In low-income countries where this is the case, aggregating plots would improve productivity for farmers. Can carefully designed markets help farmers in these countries to do this?
The research
Using surveys and lab-in-the-field experiments in Uganda and Kenya, the research team identified several market frictions in local land markets. In theory, these frictions could be reduced by allowing for conditional offers, such as an offer to lease out one plot in exchange for leasing a different one. In lab-in-the-field experiments, their research showed that allowing for conditional offers led to more consolidation and greater overall efficiency. Allowing for conditional offers also tended to reduce inequality of outcomes between farmers.
The impact
Better-functioning and more equitable land markets could reshape rural landscapes in ways that improve productivity and other outcomes for farmers and communities in less developed parts of the world. The research team’s results support market design as a way to achieve that outcome. The game they developed can be used to test interventions in any market with similar problems of fragmentation.
Departments: Economics, Finance
Area: Process and practices
Researchers
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Sustainable Development Goals
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