Property Rights in a Very Poor Country : Tenure Insecurity and Investment in Ethiopia

This paper provides evidence from one of
the poorest countries of the world that the property rights
matter for efficiency, investment, and growth. With all land
state-owned, the threat of land redistribution never appears
far off the agenda. Land rental and leasing have been made
legal, but transfer rights remain restricted and the
perception of continuing tenure insecurity remains quite
strong. Using a unique panel data set, this study
investigates whether transfer rights and tenure insecurity
affect household investment decisions, focusing on trees and
shrubs. The panel data estimates suggest that limited
perceived transfer rights, and the threat of expropriation,
negatively affect long-term investment in Ethiopian
agriculture, contributing to the low returns from land and
perpetuating low growth and poverty.