Land tenancy and efficiency of land use in the Highlands of Eritrea

The paper tests two theoretical models that explain land productivity differentials between owner-tenants, owner-operators and owner-landlords, and between plots of land operated under different tenancy contracts by owner-tenants.The owner-tenants were richer in non-land resources than owner-operators and owner-landlords and the analysis showed that the land productivity followed the same pattern being highest for owner-tenants. This shows that the land rental market transfers land from less efficient to more efficient land users. However, the fact that productivity differentials persisted after participation in the land rental market indicates that there were significant transactions costs in this market.The report also tests a theory that tenure insecurity (threat of contract non-renewal) created incentives for more use of non-land resources on rented land relative to own land vs. the disincentive effect due to output sharing. It found that land productivity was higher on cost-shared land than on own land of cost-sharing tenants while land productivity on sharecropped land was not significantly different from on own land of share cropping tenants. This may indicate that tenants work harder on rented land to increase probability of contract renewal and this compensated for the disincentive effect of output sharing in sharecropping contracts. [author]