Intro

The interest among academics to research the relationship between property rights and

investment increased following the World Bank’s “Land Reform Policy Paper” in 1975. Since

then there has been a trend in land policy towards establishing individual property rights.

Several studies (Carter & Olinto 1996; Lopez 1996; Deininger et al. 2006) show that property

rights have a positive impact on promoting investment on land. The widely acknowledged

theoretical incentives to invest as a result of secure property rights on land1 according to

Besley (1995), is that it may: (i) act as an incentive to invest in long-term improvements in the

land; (ii) provide collateral for loans; and (iii) make transfer of the land possible. Feder et al.

(1988) states that; land tenure security relates to investment in agriculture through demand

and supply-side effects. On the demand side, an enhancement in tenure security would

increase farmer demand for medium to long-term land improvements (investments on land).

This increase in demand is derived from the fact that better tenure security will increase the

likelihood that the farmers will capture the returns from investments. As a result, demand for

short-term inputs (farm chemicals, labour) will increase as well.

However, these three effects of enhanced property rights and the demand and supply side-

effects depend on the assumption of complete markets. Once this assumption is relaxed, the

empirical evidence of the impact of enhanced land rights on investment are inconclusive

(Jerome 2002, Zerfu 2007, Abdulai et al. 2010). This is of course an obvious result as

complete markets do not exist in all instances, especially in developing countries. Of case

studies available in the literature from developing countries, there is a large amount of

literature from Sub-Saharan Africa. This is because of the lack of complete markets there and

where informal land rights through customary and community tenure systems cover most of

1 (Secured property rights) where the owner’s decision is the sole determinant of the resource use (North, 1981).

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the rural agrarian land. The gaps in conditions that are necessary for the above mentioned

effects to increase investments has spurred an interest in finding solutions on how investment

still can take place and in what form, even without such conditions being fully installed.

This paper sets out to present findings from the literature about the relationship between

property rights and investment incentives. The evidence will be presented by first reviewing

the earlier theories on the relationship, followed by presenting the different tenure types

which can be found in the literature through the land rights and tenure regimes they exist

under. After this, the preconditions and incentives that promote investment are discussed.

After defining these factors that influence the decision to invest, two hypotheses will be tested

to show the empirical evidence found of which land rights, tenure regimes and factors that

must be in place in order for various outcomes found in the literature to occur. The choice of

the improvement through its quality and quantity will be correlated to find which property

rights, conditions and factors produce the greatest propensity to invest in agriculture. Finally,

conclusions will be drawn based on the evidence found in this literature review.

Earlier theories and evidence

The theory that property rights must be secured through formal titling in order to increase

investment is old, acclaimed to be the catalyst of the industrial revolution (Trevelyan

1944:381, cited in Peters 2006). This focus was rejuvenated during the “the land reform

decades” (Sjaastad & Bromley 1997; Bassett 1993) from the end of the 1960s to the

beginning of the 80s, when a similar view on the relationship between property rights and

investments were; “that customary systems did not provide the necessary security to ensure

agricultural investment and productive use of land. These land policy reforms failed to

achieve the expected improvements in these areas, did not facilitate the use of land as

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collateral for loans, and caused speculation in land by outsiders, displacing the very people

which were supposed to acquire increased security through titling” (Peters 2006). The costs

and insecurity to vulnerable groups that systems of formal property brought about was too

high versus the improvements that such changes offered in Africa (Quan & Toulmin 2004).

The World Bank advocated for formal property rights up till the end of the 1980s. In the

beginning of the 90s the Bank began to acknowledge communal and customary systems as

more advantageous regarding cost effectiveness and equity (depending on sufficient

accountability) and urged caution about state-led intervention in land tenure systems,

suggesting building on existing systems (Bruce & Mighot-Adholla 1994, Deininger &

Biswanger 1999, cited in Peters 2006). Platteau (1999) found that there was no discernible

impact of titling on investment behaviour, as customary rights were often very secure, and

negotiable. Beyond semi-urban situations, the cost effectiveness of centralised land registers

versus decentralised informal mechanisms was doubtful. There were also unwelcome or

unexpected effects on distribution, as registration tended to favour the rich, well educated,

well connected and male.

It is widely accepted that many customary tenure systems provide sufficient tenure security to

stimulate investment and growth (Bruce 1993; Platteu 1996, cited in Place 2009). Where

farmers consider their rights under customary law as sufficiently secure, registration may not

result in higher investment and simpler means than full-fledged titling procedures may

increase the incentive (Quan & Toulmin 2004). Formal registration of land rights seem to

make sense in circumstances where customary systems have become extinct, major tensions

exist between different groups which cannot be handled by local institutions for dispute

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management2, in resettlement or newly settled areas and in areas of high value land, such as

urban and peri-urban areas where competition for land is fierce (Quan & Toulmin 2004). The

World bank envisages registration of group rights (such as customary and community tenure

systems) as a possible first step in the process of titling, expecting to eventually allow

individualised property rights formalised as a written title to a physically demarcated land,

transferable through a market (Chimhowu & Woodhouse 2006). Hence fulfilling the required

conditions to benefit from the incentives that secure tenure rights creates, as mentioned by

Besley (1995).

The “new wave” land reforms built on being decentralised, market-friendly and involving

civil society action and consensus (IFAD 2001, cited in Bernstein 2004). Focus has in many

regions changed from ownership in the land towards securing obligations and rights to it; such

is the case in Mozambique (Kanji et al. 2006). The 1997 Land Law of Mozambique gives

community land rights regal recognition without defining their precise content and establishes

procedures for delimitation and registration of community land rights (Sjaastad & Cousins

2008, Norfolk & Tanner 2007).

Tenure types

In the context of property rights, three types of tenancy regimes are identified (state,

customary and individual), which to some extent gives the tenant under such a regime three

possible rights to the land (usufruct, sharecropping, full rights). In this section these land

rights and tenancy regimes will be presented.

Land rights:

2 A disincentive in areas where several authorities exist, as in West Africa, conflicts have arisen as there is considerable uncertainty over who may deliver rulings over land disputes, as one arbitrary authority may overrule the other. As a result, outcomes cannot be predicted and all forms of arbitration may be challenged (Lavigne Delville 2000).

4

Usufruct rights mean that the tenant has only usage rights to the land and is not entitled to

compensation to any investments made on the land. The incentive to invest will be in working

capital solutions that are low cost and will benefit the tenant in the short-term, such as

inorganic fertilizer and pesticides. The propensity to invest in land in which the tenant has

usufruct rights increases as the duration of time that the tenant is given to use it is prolonged.

Usufruct land rights are also common under lease and rent agreements with individual

landowners. The duration of the agreement defines the tenant’s incentive to invest in long-

term productivity enhancements, such as trees and soil improvements, as the tenant must have

an adequate time frame in which to capitalise from the investment.

Sharecropping is a management and lease contract (Vermeulen & Cotula 2010) in which a

landowner and tenant split the crop (or its proceeds) along a pre-agreed percentage. Other

types of management and lease contracts are usually different versions of sharecropping, such

as rental agreements, but the similarity is that the tenant is not the owner of the land or does

not receive the full return on investments. Some sharecropping agreements are made where

the landowner or buyer provides the landholder with inputs in return for parts of the produce.

For rental agreements, the incentive to invest will depend on the duration of the agreement, in

which short-term investments that will boost outputs rather than sustaining the productivity of

the land will be sought for when the tenant feels that is the best solution to regain the

investment.

Full rights are usually deemed as when the land is formally registered to the tenant and he/she

has a title to prove ownership to the land. With this claim to the land, the benefits of secure

tenure rights by Besley (1995) occur, such as: the tenant’s land is protected by law, the land

can be transferred according to the tenant, and the land can be used as collateral towards a

loan. This land right is deemed to create the largest incentive to invest in long-term solutions

to the land, as the land is owned by the tenant indefinitely, making him/her the landowner.

Evidence exists of where the tenant has full rights, either through a certificate or within a

community but not registered formally. Weaker types of full rights exist, where transfer

restrictions are made, such as the right to sell the land although bequeathing it is allowed.

The attraction of a full rights, such as registering and titling of land allows, is related to the

level of protection it affords: titled land in Mali would be expropriated only under

extraordinary circumstances and would involve much higher compensation than is the case

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for the rest of the Malian territory, where local land users are only granted use rights

(Benjaminsen et al. 2008).

Tenancy regimes:

Under state tenancy regimes; all land is owned by the government of the country. In such

situations tenure security is deemed weak as the government may decide to repossess and

redistribute land through land reforms. The most usual rights under state is therefore similar

to usufruct, as tenants do not have title or rights to the land. Empirical evidence shows that the

tenant’s incentives to invest in long-term improvements to enhance yields are weaker in cases

where the state has frequently redistributed land. In many countries stronger land rights have

been issued to tenants on state owned land, either through land reforms giving tenants full

rights through title, long-term lease certificates or similar.

Customary tenancy regimes base themselves within a community, in which a chief or head of

the community administers the community lands. Usufruct, sharecrop and individual land

rights, both titled and not, exist. Tenancy of land is either inherited within the families of the

community, or allocated by the chief or head through sale, lease, rent or gift to community

members or outsiders. The right that land can be transferred and bequeathed by community

members varies. Other names for this type of tenancy regimes are tribal or indigenous. These

regimes are termed as dynamic, as they evolve according to the circumstances and needs of

the community. Evidence of this is how communities have changed tenancy rights towards

more individual land rights for its members, giving them similar use right as full rights and

sometimes combining formal registration of the land to allow access to land markets and

credit. To some extent these individual titled land rights can include all the benefits of full

rights and the social security which members of a community enjoy. Tenure security is

usually strong as rights to the land are respected by the members of the community.

Individual tenancy regimes exist where the land right of the tenant are identical to full rights

and formally registered and titled. With these land rights, the tenant has theoretically the

strongest incentive to invest in the land, as all benefits from the land will befall the tenant.

There is however cases where rights overlap the same plot of land where the tenancy regime

land fall under changes. The most usual is of land under state and customary tenancy regimes

being registered to tenants either by formalising the land or redistribution, hence

6

strengthening the tenant’s land rights. In the case of state owned land changing ownership

into formally recognised community or individual land, this is done by increasing the property

rights of a community as a whole and individuals towards full rights to the land. This process

can be done by demarcating, registering and titling the land to the owner. Criteria for being

eligible for receiving such rights to land may be through proven occupation or intention to

invest in the land.

Preconditions and factors that works as incentives to invest

The incentives for investment go beyond the security of the property rights and the tenancy

regimes a landholder’s property is under. The landholder’s feeling of having secure property

rights is crucial in order to undertake investments, as they must be able to see the chance of

profiting from investments made in the duration of time they have usage of the land. The

landholder’s knowledge of the rights to the land they are in possession of determines the type

of investment that will be made. That is why increased land ownership and clarification of

duration and rights to the land help landholders to make the investments that will yield the

most throughout the possession of the land. In order to know what investments will yield the

most benefits, previous possession and available capital to the household (financial, fixed,

working, human) can prove beneficial when incentives such as strengthened land rights,

access to credit (informal or formal), availability of technology and know-how that can

increase yields and commercial opportunities to trade outputs are made available. Such

incentives may trigger investment and then the landholder’s available capital may prove a

precondition to how well these incentives are used.

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Household capital sources

• Financial capital encompasses all monetary resources that a tenant may have at

disposition to acquire improvements.

• Fixed capital includes all land structures that are on the land. These could be

buildings, trees, man-made formations such as terracing, soil bunds, fencing, and

irrigation.

• Working capital is resources which when implemented to the land can enhance yields,

such as manure, fertiliser, livestock, and labour.

• Human capital takes into account the capacity the landholder’s household have to take

advantage of incentives. This can be measured through the amount of labour available

and level of education the household bestows, in order to determine knowledge

capacity to make decisions, learn and implement improvements.

The factors that act as incentives to invest in improvements to the land are mainly linked to

the increase in land rights that a landholder may have. As mentioned earlier, the knowledge of

the use rights in which a landholder has to the land determines what type of investments will

be implemented. The increase of time and especially rights to the land, moving from usufruct

to full rights, will encourage landholders to invest as the possibilities to use the land

improves. Other incentives not attached with the strengthening of property rights is the

improvement of inputs and outputs options made available. Inputs are in the form of new

technology and know-how made available which if implemented will increase yields. The

produce from the land is the output and improved access to markets act as an incentive to

selling the output. A factor which enhances the propensity to access both inputs and outputs is

the quality and availability of infrastructure and distance from them to the property.

Identifying linkagesTo answer whether or not secure property rights increases the incentive for landholders to

make investments in agriculture, we create the following two hypotheses:

i) Does the literature provide evidence that secure property rights increases the

incentives for landholders to make investment in agriculture?

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ii) Is it true that insecurity of ownership and mismatches between state and customary

tenure regimes are concrete disincentives to investment decisions in agriculture?

These two hypotheses will be answered by looking at four different outcomes of improved or

weakened property rights that are found in the literature reviewed. Using empirical evidence,

the two hypotheses will be answered through findings divided into the outcomes that: i) more

secure property rights will increase the incentive to invest, ii) increased investments will

provide more secure property rights, iii) less secure property rights work as a disincentive to

invest, and iv) less investments provide less secure property rights. Following the empirical

evidence from case studies in which each of these outcomes are true, the conditions in which

such outcomes occur will be presented.

i) More secure property rights = increased investment incentive

An analysis of the literature shows that the propensity to invest increases when property rights

are more secure is true when more full rights to the land are established, regardless of the

tenure regime. This is either done through registering and titling of land, in which the

literature review provided 20 cases where this was true, or through more secure usufruct

rights, in which 14 cases were identified. All the cases mentioned can be found in appendix 1.

When land is identified by the landholder as secure, either by being owned or that the

likelihood that the land will be repossessed by the owner is weakened, the preconditions

existing in the household have been identified as factors necessary to which incentives will

provide investment. Preconditions that work as determinants to both the quality and the

quantity of the investment is often the land size, distance from plot to homestead, soil

condition, pre-existing ownership to the land, fixed and working capital wealth, education of

the head of the household, and labour availability.

Incentives which are highlighted as catalysts for increased investments, apart from the

strengthening of property rights, is the access to credit and commercial opportunities made

available.

As more secure property rights will provide longer time duration that land is in possession to

the landholder and the rights to it, the propensity to invest in general, and in fixed investments

9

increases. Evidence shows that fixed capital investments are more common when this

outcome is true, although the means to how improvements are undertaken varies. The

improvements most cited as a result of secure property rights were tree planting, soil

conservation methods and crops. Comparative studies between different tenant groups’

property rights have produced evidence that in areas where different degrees of security

exists, the less restrictions to the tenant’s rights increases the propensity to invest, such as in

Ghana and India (Abdulai et al. 2008, Pender & Kerr 1999). Although many countries lack

developed land markets, a requirement in order to obtain credit, more secure property rights

can increase investment through the use of the households’ initial wealth and access to labour

to undertake improvements (Kille & Lyne 1993, Deininger et al. 2006, Saint-Macary et al.

2009, Smith 2004).

In Thailand, access to formal credit markets increased the propensity to use the land as

collateral in order to gain loans to invest in the land (Feder 1988). The correlation between

secure property rights and access to credit is true in Paraguay, although land size matters in

order to being able to use land as collateral (Carter & Olinto 2003).

ii) Increased investment = more secure property rights

An econometric problem raised on the findings that studies have presented, are that they have

failed to check for endogeneity bias (Brasselle et al. 2002). Besley (1995) controlled for

endogeneity in the same data used by Migot-Adholla et al. (1994) and found the opposite

results. Once done, the relationship that secure property rights increases investment changed,

proving that the causalities for investment actually strengthens a tenants ownership to the

land, hence increasing property rights.

In situations where the landholder’s security to the rights of a property is uncertain or weak,

fixed capital investments to the property may increase the tenant’s right to the land in case of

a dispute (Baland et al. 1999, Chimhowu & Woodhouse 2006; Deininger & Jin 2006).

Fixed capital investments, such as tree planting and soil bunds, are often mentioned as

investments that improves security under both state (Deininger & Jin 2006) and customary

tenure regimes (Baland et al. 1999, Brasselle et. al. 2002). The construction of soil bunds in

Ethiopia was identified to create the same outcome (Gebremedhin & Swinton 2003). The case

of increased investments being used to secure more property rights in order to meet a

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threshold is true in Zambia, where leaseholders of state land must show good land use and

willingness to invest in order to receive a title to the land (Smith 2004). All case studies where

this outcome was identified can be found in appendix 2.

Less secure property rights = investment disincentive

In cases where the user of the land is not the owner of it, the risk of the land being

repossessed by the land owner is a disincentive to invest in long-term improvements unless

the tenant feels that the investment can be regained within a perceived time frame or

compensation for investments made is guaranteed.

The following statement is true where state owned land is repossessed in order to redistribute

it to ensure all inhabitants have the right to farm land, which has occurred with frequent

intervals in Ethiopia and Eritrea (Deininger & Jin 2006, Tikabo & Holden 20007). It is also

the case in China (Li et al. 1998) and Eritrea (Tikabo & Holden 2007), where rotation of land

is a common practice.

Less secure property rights is also a disincentive to leave land fallow for longer periods of

time in Cote d’Ivoire (Fenske 2010), as outsiders who have received land under customary

tenure regimes fear that it may be repossessed if left unused as their rights are not as strong as

original community members and leaving land fallow may indicate that it is not necessary and

can therefore be used by others.

Rented land does not provide incentives to invest in improvements that will yield beyond the

duration of time that a tenant has agreed to rent the land for, as often the rights to rented land

is only usufruct and no compensation is given for improvements that do not benefit the tenant.

Short-term working capital improvements are often sought for, such as inorganic fertilizer

(Abdulai et al. 2008). Also, given the option, a landholder will choose to invest more in land

owned, rather than rented (Gavian & Fafchamps 1996).

Investment disincentive = less secure property rights

No studies have focused on this outcome but it is logical to believe that even if the propensity

to invest is not available, property rights will not be strengthened.

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Based on the evidence found when testing the four outcomes, we find that the first hypotheses

to whether secure property rights increases the incentives to investment holds when tenants

obtain more rights to the land. These rights do not have to be formal in order to increase

investments but it is a condition in order to obtain credit from formal institutions and to

transfer land through formal land markets. The reason for this is that many investments

undertaken are labour-intensive, rather than resource-intensive, meaning that they depend

more on the preconditions that the household has than using incentives that more secure land

rights produces. The evidence finds that increased property rights encourages improvements

to be of a larger scale and more long-term than what is found on land with less secure

property rights. Yields are also higher on land owned in the long-term (Deininger 2000)

although there is evidence that short-term investments into more yield-intensive

improvements, such as inorganic fertilizer and pesticides, can produce yields larger than

found on land with long-term investments, for a short period of time but may drain the soil of

nutrients. Evidence shows that not only does more secure property rights increase investments

that produces higher agricultural yields but also encourages soil conservation measures (Li et

al. 1998, 2000, Saint-Macary 2009).

The second hypotheses, that insecure ownership to land and restrictions to rights found on

land under state and customary tenure regimes may act as a disincentive to investment in

agriculture is true, based on evidence looking at the outcome in which less secure property

rights may have an effect on the quantity and quality of improvements made. Land laws in

countries such as Ethiopia and Eritrea provide all inhabitants the right to receive land for food

production. This, together with policies of land rotation, in order to guarantee that nobody

receives poor quality land, decreases the incentives to invest in fixed improvements.

Not only do insecure property rights work as a disincentive to investment but the investments

made may be so intensive in the short-term that they may drain the soil of nutrients, hence

damaging future production from the land. The fear of losing land left fallow also damages

soil conditions, as it must be set into production in order for the landholder to keep possession

of it (Fenske 2010). Evidence shows therefore that not only do insecure property rights

decrease the investment incentive but may also discourage soil conservation measures.

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Although the evidence found in the literature provided these three outcomes of the

relationship between secure property rights and investment incentives, two more outcomes

were identified in which the security of property rights produced other incentives to

investment than what was found earlier.

Less secure property rights = increased investment incentive

Less secure property rights may not matter for the incentive to invest in cases where the

benefits of more secure property rights, such as access to credit and existence of land markets

are not available or weak. In land abundant areas, the need for formal registration of land may

be unnecessary if informal institutions provide adequate security to an owner’s right to land

(Jacoby & Minten 2005). In cases where this is true, the investments sought for are labour-

intensive and do not require financing or resources from outside the household.

Machaya (2010) found no difference between the incentive to invest among land owners in

Malawi with or without title to their land, when preconditions such as the distance to market

and land size was included. The reason for this was that the improvements were mostly

labour-intensive and performed by household members.

More secure property rights = investment disincentive

Land reforms in which the intention was to give tenants more secure property rights, may also

act as a disincentive to invest when the guarantee of the land not being repossessed is not

strong enough.

Such cases have occurred in Nicaragua, where several governments since the 1970s have

implemented land reforms and issued titles and granted land rights (Bandiera 2007). Due to

the multitude of different documents and various degrees of strength that they carry, the

propensity to invest has been weakened or investment has been done with uncertainty.

Bromley (2008)2 likens the lack of commitment by a government to respect property rights by

not strengthening the institutions that are meant to uphold the rights through formalisation as

‘governments issuing counterfeit currency’.

In Peru, government land titling did not achieve the positive benefits associated with secure

property rights, such as increased use of credit because the landowners did not believe they

13

would be able to repay the loans (Kerekes & Williamson 2010). Similar evidence is found in

Kenya (Shipton 1992).

Further evidence of when more secure property rights do not encourage investment is when

land with full rights has been acquired for speculative purposes such as; sale, social prestige

or political power, formal documentation of property rights do not guarantee land being

repossessed (Platteau, 1995, Lavigne Delville 2000).

In cases where the legal system cannot guarantee to prosecute borrowers who fail to repay

loans, financial institutions do not accept land as collateral (Platteau 1995, Bromley 2008).

Factors that increase the propensity to invest

Keeping with the evidence found that supports the first hypotheses; we investigate the

investments done on the quality and quantity of the improvements, linking it to the different

factors identified which influence the decision. The intention of studying the positive

correlations between more secure property rights and investment incentives is to uncover the

preconditions and incentives which provide the largest increase in improvements, both in the

quality and quantity.

As mentioned earlier, the single largest incentive to increase investments is the strengthening

of property rights. Evidence exists of more secure property rights not improving the

incentives to increase but then the motive of the landowner is not genuine towards investing

in the land or the threshold to access inputs is too high. For a landholder or owner to make use

of more secure property rights, certain factors play a role, such as the household’s initial

capital, access to inputs and outputs.

Comparative studies reveal that within the same area, different strengths of property right do

have an effect on the incentive to invest. Studying the quality and quantity of improvements

invested in Pender & Kerr’s (1999) Indian study of two villages where land is either titled or

assigned to landowners, we find that the types of improvements are identical, although the

quantities tend to be greater on titled property. The authors explain this greater propensity to

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invest as owing to the household’s characteristics, and that the magnitude of impact of these

characteristics is greater on titled plots.

The choice of improvements differs according to the security of property rights in Abdulai et

al’s (2008) study of four different land ownerships in Ghana. Yields were found to be higher

on owned rather than rented or sharecropped plots as a result of investing improvements that

produced higher yields per hectare. The household’s initial capital was found to have a strong

influence on the decision to undertake the investment, along with closeness of the land and

homestead.

Many studies provide evidence that the precondition that matters most to the landholder when

secure property rights is in place, is the household’s capital wealth.

Evidence has shown that in areas where population density and the demand for land are high,

secure land rights can increase investments that produce higher yields, such as in Ethiopia

(Deininger & Jin 2006), other countries in Africa3, post-communist countries4 and Latin

America5, India (Pender & Kerr 1994) and Thailand (Feder 1988). The disappearance or

overexploitation of common property resources also works in the same way as community

members seek more secure property rights in order to guarantee grazing lands and undertake

conservation measures to their livestock and crops in Cambodia (Markussen 2008).

The right to use land for long periods of time encourages the use of land-saving investments,

such as in China’s agricultural sector, where farmers invested more inputs in private plots that

they had longer tenure over than the collective ones (Li et al. 1998). The need for secure

ownership rights over a sufficiently long time horizon does not need to be a formal title to

facilitate improvements, although must be long enough for the landowner to be able to

3 Zimbabwe (Moor 1996), Gambia (Hayes et al. 1997), Ghana (Abdulai 2008)4 Russia, Ukraine, Poland, Slovakia and Romania (Johnson et al. 2002)5 Honduras (Lopez 1996), Paraguay (Carter & Olinto 1996), Brazil (Alston et al. 1996)

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recapitulate the investment made (Brasselle et al. 1997; Gavian & Fafchamps 1996, Deininger

2004, Zerfu 2007). Rodrik (1999) notes that what matters for the tenant’s investment decision

is rather the control over the return on the investment, rather than the form of ownership per

se. In spirit of this, the current land registration program that is underway in Ethiopia to

guarantee secured usufruct rights may be a good step towards investment by strengthening

tenant’s property rights (Zerfu 2007).

The lack of facilities to accommodate the theoretical benefits of property rights, such as

physical infrastructure, effective credit systems and marketing institutions, have constrained

output such as experienced in Ghana, Rwanda and Kenya (Migot-Adholla et al. 1991). In

defence of the indigenous tenure regimes (customary) and the lack of investment in rural

Africa, Sjaastad and Bromley (1997) find that lack of investment opportunities as determined

by the cost and availability of agricultural technology are the causes.

Conclusion

By comparing the empirical evidence found on the relationship between secure property

rights and its incentive to increase investment in agriculture, we find proof that this is true the

closer to full rights a landholder has to a property, looking at the quality and quantity of the

improvements made increases. However, the level of rights that the landholder of a property

has should not be the only determining factor which should be focused on when finding the

incentives to increase investment. As the findings of the literature states, there is no unison

agreement that property rights, in the sense of being individually titled rights, documented

and stored in a registry, increases investment versus other types of tenure systems. Customary

tenure regimes have proven to accommodate secure tenure in the communities they exist in,

although there are cases of lack of equity within these systems and not as secure as titling.

16

Quan and Toumlin (2004) conclude that replacing the customary system in Africa with a

system of private property was believed to be the way forward for capitalist economic growth.

However this has proved difficult due to the costs and insecurity to vulnerable groups that

such a system brings about. There is a clear understanding that securing of property rights is

necessary in order to increase investments, as this is one of the main purposes of property

rights (Deininger 2004). The effect that property rights will have on investment increases as

conditions such as; the rights to the land increases, commercial opportunities are made

available, accessibility to technological improvements increases, right to transfer and the

opportunity to use land as collateral towards loans (Platteau 1995, Bromley 2008).

The empirical evidence illustrates that there are more factors that determine the incentive to

invest than simply the land rights a landholder has to a property. The landholder’s initial

capital resources and incentives promoting the use of inputs and outputs are factors that must

be accounted for when policies to increase investments in agriculture are to be made. Without

strengthening both the preconditions and the additional incentives to investment apart from

strengthening property rights, the quality and quantity of investments made to improvements

will not be optimal. This conclusion has been echoed by many studies previously, especially

in the light of cases where the implementation of more secure property rights has not borne

the improvements to agriculture as expected (Zikhali 2010).

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Appendix 1:

Country Author Year Tenure regime Land rightBangladesh Rasul, Thapa, Zoebisch 2004 State TitledBrazil Alston, Lobecap, Schneider 1996 Individual TitledBurkina Faso Kazinga & Masters 2001 Customary UsufructCambodia Markussen 2008 Individual TitledCameroon Kazinga & Masters 2005 Customary UsufructChina Li, Rozelle, Brandt 1998 State UsufructEritrea Tikabo & Holden 2007 State UsufructEthiopia Deininger & Jin 2006 State Usufruct-“- Deininger, Ayalew, Alemu 2008 State Usufruct-“- Gebremedhin & Swinton 2003 State Usufruct-“- Zerfu 2007 State UsufructGambia Hayes, Roth, Zepeda 1997 Customary UsufructGhana Abdulai, Owusu, Goetz 2008 Individual Titled-“- Besley 1995 Customary Usufruct-“- Goldstein & Udry 2008 Customary UsufructIndia Deininger, Jin, Nagarajan 2007 State Titled-“- Pender & Kerr 1999 State TitledIvory Coast Fenske 2010 Customary UsufructKenya Hunt 2005 Individual TitledMalawi Chirwa 2008 Individual TitledNicaragua Bandiera 2007 Individual Titled-“- De Laiglesia 2004 Individual Titled-“- Deininger & Chamorro 2002 Individual TitledNiger Gavian & Fafchamps 1996 Customary UsufructParaguay Carter & Olinto 2003 Individual TitledPeru Fort 2008 Individual TitledPhilippines Deininger, Olinto, Maertens 2000 Individual TitledRwanda Clay, Reardon, Kangiasnier 1998 State UsufructSouth Africa Kille & Lyne 1993 Individual TitledThailand Feder 1988 Individual TitledUganda Deininger, Ayalew 2007 Individual Titled-“- Deininger, Ayalew, Yamano 2006 Individual TitledVietnam Saint-Macary, Kell, Zeller, Heidhues, Dung 2009 State TitledZambia Smith 2004 State Titled

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Appendix 2:

Country Author Year Tenure regime Land right

Burkina Faso Brasselle, Gaspart, Platteau 2002 Customary UsufructEthiopia Deininger & Jin 2006 State Usufruct-“- Gebremedhin & Swinton 2003 State UsufructUganda Baland, Gaspart, Platteau 1999 Customary UsufructZambia Smith 2004 State Titled

(certificate)Zimbabwe Zikhali 2010 State Titled (FTLRP)

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