Land and Labor

Dr. George NortonAgricultural and

Applied EconomicsVirginia Tech

Copyright 2009

AAEC 3204AAEC 3204

Objectives

• Discuss meaning of land tenure and land reform

• Consider why land reform is:• Often necessary for agricultural development• Difficult to achieve

• Discuss nature of land and labor markets in developing countries

What is land tenure?

Rights and patterns of control over the land resource

Control over land influences ability of farmers to shape other aspects of development policy

The level of income in agriculture and its distribution are affected by land tenure

Evolution of land tenure systems reflect: Adaptation to:

History Environment Policy Technology

Over time systems change as they experience: Changing relative prices of inputs and outputs Policy changes

In some cases, system does not adjust Why?

Transactions costs and collective action allow groups in power to maintain status quo

How might transactions costs influence farm size?

Farms are also organized in many ways Small family farms Large commercial farms Corporate farms State farms Group farms

And, there are many types of tenancy arrangements• Owner-operator• Customary land rights• Fixed wage• Share lease• Cash lease (fixed amount)

These types differ in incentives, risk, and transactions costs for owner and tenant

Determinants of Tenure Changes• “Natural determinants”

• Population pressures• New technologies• Market prices• Increased communications & lower transactions

costs• Political determinants• Change in tenure regimes can be subtle and

incremental or abrupt

What pressures might population growth and new technologies place on existing land tenure arrangements?

Both can raise the value of land which creates pressures to change ownership patterns

What is land reform?

• Attempt by the government through public policies to change the agrarian structure

• It can change the mode of production, class structure, and pattern of land tenure

Why may land reform be necessary from an employment standpoint?• Small holdings may mean marginal product

of labor near zero• Large holdings often not farmed intensively

Why is land reform so difficult to achieve?

Why are large holdings in densely populated countries a concern?• Land may be under-utilized• Lack of supervision of labor• Incentive problem for workers• Too capital-intensive given the resource base• Landowners will not tax themselves

Average farm size

Region Average holding size (hectares)

Sub-Saharan Africa 5.2

East and Southeast Asia 1.2

Latin America 19.1

Near East ana North Africa

9.3

Should there be land reform if:• Land distribution is very unequal, large farms are

not farmed intensively, and many small farms have a marginal product of labor near zero?

• Many large farms were purchased by the current land owners and they do not want to sell?

• Large farms were taken from indigenous people generations ago and they have been passed down through many generations since then?

• Land reform will cause a decrease in marketed surplus in the short run?

What are the major types of land reform

1. Semi-feudalism

capitalist or socialist farms 2. Capitalist farms with skewed land

distribution and socialist farms

more evenly distributed farms with private incentives

Examples of land reforms

China Russia/Eastern Europe Peru Tanzania Zimbabwe Colombia Philippines Ethiopia

Some have involved huge upheaval, others have been more subtle

What are measures of a successful land reform?• Incentives created for capital investment• Growth of peasant associations• Agricultural productivity change?• Marketed surplus change?

Requisites of a successful land reform

• Government commitment, power, and administrative organization

• Land records• Clear and simple criteria for acquiring land• Quick-taking procedures• compensation

Requisites (continued)

• Former owners not allowed to re-buy land• Disseminate skills and new technologies• Payments by new owners must be modest• Services: credit, marketing, input, etc.

Agricultural Labor

• Agricultural labor markets balance out differences in land and labor endowments

• Why are there both casual and permanent labor markets?

• What might be the role of government in labor markets?

• Labor markets are critically important to the poor, often landless, rural families

Conclusion

• Land reform is difficult, but in some cases a necessary (but seldom a sufficient) condition for agricultural development

• Land rental market changes will also occur with development and are key to balancing land with labor markets