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Introduction
Most of the work on the relationship between farm size and productivity strongly suggests that farms that rely mostly on family labor have higher productivity levels than large farms operated primarily with hired labor (see Binswanger et al. 1995) for a review of the literature). If that is so, why do extraordinarily unequal distributions of ownership and operational holdings persist in many parts of the world? Why have markets for the rental and sale of agricultural land frequently not reallocated land to family farmers? Why is land reform necessary to change these land ownership distributions?
The great variations in land relations found across the world and over time cannot be understood in a simple property rights and markets paradigm. Section 2 explains the idealized sequence of the emergence of property rights: Increasing land scarcity leads to better definition of rights, which are become tradable in sales and rental markets. The outcome should be the allocation of land to the most efficient uses and users. Yet this often did not happen, as great observed deviations
from efficiency demonstrate. Instead rights over land and the concentration of ownership observed historically across the World were outgrowths of power relationships (Section 2). Landowning groups used coercion and distortions in land, labor, credit, and commodity markets to extract economic rents from the land, from peasants and workers, and more recently from urban consumer groups or taxpayers. We describe the variety of land relations and their consequences for the efficiency of agricultural production. We then examine how these power relations emerged and what legal means enabled relatively few landowners to accumulate large landholdings.
Because land ownership distribution has often been determined by power relationships and distortions, and because land sales markets do not distribute land to the poor (the key point of section 5), land reform has often been necessary to get land into the hands of efficient small family owners. The nature, successes and failures of reform are discussed in section 3. The social cost of failing to undertake reform, including losses in productivity as well as peasant revolt and civil war, are also considered. If land sales markets could allocate land from inefficient large owners to small family farmers, land reform would not be necessary. Showing
why sales markets are often not capable of facilitating these efficiency-enhancing transfers - covariance of risks, imperfections in credit markets, distortions in commodity market and subsidies to large farms are among the reasons - is the topic of Section 5. In Section 6 we draw implications for land reform policies.
Footnotes:
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This paper has been prepared for the workshop “Land Redistribution in Africa: Towards a common vision.” The findings, interpretations, and conclusions expressed herein are those of the author(s) and do not necessarily reflect the views of the International Bank for Reconstruction and Development/The World Bank and its affiliated organizations, or those of the Executive Directors of The World Bank or the governments they represent.
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This paper is largely drawn from our joint paper with Gershon Feder on Power, Distortions, Revolt and Reform (1995). Hans P. Binswanger-Mkize is Professor Extraordinaire at the Institute for Research on Innovation, Tshwane University of Technology, Tshwane, South Africa, and Klaus Deininger is a Senior Economist at the World Bank.
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