This PhD study focuses on the land tenure systems in the highlands of Eritrea with a particular emphasis on land rental markets, land contract choice, and on the implications of land tenure systems for farm household’s resource allocation behaviour and efficiency outcomes.The author hopes that the theoretical and empirical analysis of these issues will also contribute to the debate on land tenure and economic development in general and the land policy issue in Eritrea in particular.The study empirically analyses four issues of land tenure in the highlands of Eritrea, namely:factor market imperfections and the land rental marketthe theoretical and empirical works on land contract choiceland tenure security, resource allocation and land productivityproduction efficiency across land contract typesThe main findings of the study include: by transferring land from less able to the more able households, land rental markets improve resource allocation, help reduce land fragmentation, and increase land productivity. Policies that improve the working of the land rental markets should thus be encouragedtenure security is found to affect investment and land productivity positively. Therefore, policies that enhance tenure security by extending duration of tenure are likely to result in higher investment in medium and long-term land improving inputs and hence increased land productivity. There is a need to reform the land redistribution system to allow sufficient duration of tenure and to introduce land tenure laws that allow and encourage long-term leasingthere is a possibility that the elimination of the land distribution system and or the its extension would produce an army of landless unemployed people in the rural areas. This possibility may not be a realistic scenario in light of the evidences indicating labour market imperfections. Yet, since land availability varies across villages, it may be necessary to approach the issue more cautiously. Some villages are so poorly endowed in land that there is a need to develop alternative employment activities alongside land reform measuresthe proposal calling for consolidation of holdings in the new land policy is a step in the right direction, but area consolidation through integrated farming schemes need to be reconsidered in light of the potential incentive problems they may createthere is room to increase land productivity by improving the working of the labour market and enhancing access to credit without even having to change the existing tenure system considerablyshare tenancy should be considered as an acceptable contract form in the land market as it allows the sharing of risk and a way out of imperfection in the labour and capital markets
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