Security of property rights and transition in land use |
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| Affiliation: | 1. Kyiv Economics Institute at the Kyiv School of Economics, Ukraine, University of Kent, United Kingdomn;2. USDA Economic Research Service, United States;3. Michigan State University, United States;4. Lazarski University, Poland;1. Bank of Canada, 234 Laurier Avenue West, Ottawa, Ontario K1A 0G9, Canada;2. Department of Economics, Emory University, 1602 Fishburne Dr, Rich Bldg., 3rd Floor, Atlanta, GA 30322, USA;3. University of Bradford, Faculty of Social and International Studies, Richmond Rd, Bradford, West Yorkshire, BD7 1DP, United Kingdom;4. Kyiv School of Economics, Ukraine and National Research University Higher School of Economics, 13 Yakira St., Suite 319, Kyiv, 04119, UKRAINE;1. Institute for the Study of Labor (IZA), Schaumburg-Lippe-Str. 5-9, 53113, Bonn, Germany;2. The Brookings Institution, Washington, DC 20036, USA;3. The Bucharest University of Economic Studies, Romania;4. Harvard University, USA;5. POP at UNU-MERIT, Netherlands;6. University of Bonn, Germany;1. EBRD, United Kingdom and Tilburg University, the Netherlands;2. Universitat Pompeu Fabra, Spain;3. EBRD, United Kingdom;1. Department of Politics, New York University, United States;2. Departments of Biology and Computer Science, New York University, United States, and Simons Foundation, Simons Center for Data Analysis, United States;1. Kyiv School of Economics Kyiv, Ukrainen;2. University of Duisburg-Essen and CINCH Essen, Germanyn |
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| Abstract: | Price and yield uncertainty are traditional considerations in agricultural markets and their impact on development. Agricultural producers in transition economies face an additional risk factor – changes in the institutional protection of property rights. This paper illustrates how institutional uncertainty may affect investment, land use, and crop mix patterns. In particular, in the Ukrainian example, the rights of tenants are viewed as uncertain in anticipation of establishment of an open market for sale of agricultural land. Establishment of the land market in Ukraine has been postponed several times over the last 15 years and a significant number of lease contracts are not formalized. A large panel of farm-level data was used to show that a higher share of rented land is associated with a lower share of land used for investment intensive perennial crops controlling for prices and other factors. The difference in response to uncertainty is found to be significant among three crop types: perennials, grains and oil crops. The implication is that the lower level of protection of use rights and uncertainty regarding the future regulation of land sales market lead to under-investments in more capital intensive crops. As a result, tenants deviate from the optimal crop mix, reducing the productivity of tenant farms. Farms under 200 ha are affected most negatively as they are less likely to be able to access the level of legal and political protection enjoyed by large farms. |
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