Formal Land Rights Security and Agricultural Productivity: Can Factor Endowments Explain the Divergent Findings?

Sammanfattning: Institutions are commonly thought of as crucial determinants for economic development. This argument is also prominent in the literature regarding property rights institutions as many studies stress their significance for economic performance. In light of these studies, many international organizations have argued strongly for land rights reforms in developing countries as means to reduce poverty, because more secure formal land rights could provide incentives for farmers to undertake productivity-enhancing investments. Nonetheless, while some studies have found that there is a positive relationship between formal land rights security and agricultural productivity, other studies have not. A possible explanation to these divergent findings involves factor endowments, more precisely the relative abundance or scarcity of land. Since earlier studies overlook that factor endowments may constitute an explanation and tend to not attempt to place the land rights debate into a broader context of institutional economics, this thesis aims to make a unique contribution to the research area by drawing on new institutional economics, by systematically and critically reviewing earlier studies, and by evaluating the factor endowments explanation. The thesis concludes that the drawbacks of earlier studies are too many to infer any useful conclusions regarding the explanatory power of factor endowments. The thesis does, however, argue that a potential explanation regarding factor endowments at least should consider the existence of credit and leasing markets, as well as take into account the adequacy of utilized agricultural technologies in particular contexts, because these three factors could potentially constitute important considerations for future land rights reforms.