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Policies for enhancing access to productive resources and markets for inclusive growth and resilience – some experiences and lessons Bekele Shiferaw Partnership for Economic Policy Strategies for Eradicating Poverty to Achieve Sustainable Development for All Expert Group Meeting of the fifty-fifth session of the Commission for Social Development, United Nations, New York 1-3 June 2016 1
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Page 1: Bekele Shiferaw Partnership for Economic Policy - … · 2016-06-03 · Development for All . ... Soil erosion control rather than ... M. Jahangir Alam Chowdhury, Shabaz Amin and

Policies for enhancing access to productive resources and markets for inclusive growth and resilience – some

experiences and lessons

Bekele Shiferaw Partnership for Economic Policy

Strategies for Eradicating Poverty to Achieve Sustainable Development for All

Expert Group Meeting of the fifty-fifth session of the Commission for Social Development, United Nations, New York

1-3 June 2016

1

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Agriculture key for poverty reduction: sectoral composition of labor and poverty across regions

Source: World Bank, Africa’s Pulse vol. 10. International Income Distribution Database. Notes: The numbers correspond to working age (15-65) population weighted averages of the most recent survey between 2002 and 2012. Average of 33 (20) SSA countries and 66 (41) other developing countries for total working (working poor).

59.2

35.0

8.7

24.1

32.1 40.8

Sub-Saharan Africa Other developingcountries

Total working

Agriculture Industry Services

78.2

59.7

5.4

18.5

16.4 21.8

Sub-Saharan Africa Other developingcountries

Working poor

Agriculture Industry Services

2

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MACRO EVIDENCE: CROSS-COUNTRY REGRESSIONS ALSO SUGGEST THAT GROWTH PATTERNS MATTER FOR POVERTY REDUCTION

Africa: agriculture and services most poverty reducing

Source: World Bank, Africa’s Pulse vol. 10. Data from WDI (2014) on sectoral value added as a share of GDP and poverty data PovcalNet (2014) from 1990 to 2010. Note: The null hypothesis that the sectoral composition of growth does not matter is rejected at the 1% level for all the poverty measures (Headcount, Poverty Gap and Squared Poverty Gap). This is robust to the inclusion of controls .

Sub-Saharan Africa Other Developing Countries

VARIABLES Headcount Poverty Gap Sq. Poverty

Gap Headcount Poverty Gap Sq. Poverty Gap

Agriculture -0.668*** -1.025*** -1.322*** -1.224 -0.752 -2.411*

(0.209) (0.318) (0.417) (1.268) (1.799) (1.333)

Industry -0.086 -0.078 -0.115 -1.864*** -2.595*** -3.079*** (0.301) (0.371) (0.434) (0.483) (0.624) (0.787)

Services -0.963*** -1.233*** -1.493*** -1.881*** -1.899*** -1.195* (0.193) (0.254) (0.310) (0.507) (0.681) (0.683)

Observations 228 228 228 240 240 239 Countries 29 29 29 31 31 31 R-squared 0.280 0.309 0.319 0.367 0.344 0.377 Robust standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1

Elsewhere: industry and services most poverty reducing

3

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Access to productive assets and innovations for resilience

Access to Technologies (awareness,

knowhow, use)

Institutional innovations

(finance, markets,

insurance, social protection)

Access to land and other assets

(e.g. water, ecosystem services)

Resilience of farm households and agribusiness

to shocks

4

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Access to integrated innovations for resilience

• Direct effect on sources of risk: − Production risk − Market risk

• Reduced vulnerability

• Increased livelihood resilience

• Stress tolerant modern varieties • Improved soil fertility and water

management • Crop diversification • Crop rotations • Legume intercropping • Conservation agriculture (reside

retention, reduced tillage, rotations)

• Policy and institutional innovations for better market access

Shiferaw et al. (2014) Weather and Climate Extremes 3: 67–79

5

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1. Access to new technologies

Source: WDR 2008 – compiled from different sources 6

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Maize yield (tons) trends in selected regions (2001 – 2010)

Source: USDA, 2010

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Sub-saharan Africa with South Africa Sub-saharan Africa without South Africa

South Asia Latin America

China7

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Adoption of sustainable agric practices – SAPs (% of households)

8

Malawi (N-892)

Ethiopia (N-898)

Tanzania (N-700)

Kenya (N-613)

Mozambique (N-510)

Maize-legume intercropping 30.7 19.3 66.2 71.9 68.6 Maize-legume rotation 40.1 32.7 32.0 83.2 7.8 Reduced tillage/zero-tillage 3.1 14.9 14.5 1.0 19.8 Crop residue retention 91.0 28.5 67.9 72.4 89.4

Fertilizer adoption 95.1 81.7 5.1 87.9 19.6

Manure adoption 33.8 58.2 32.5 65.3 9.0

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Probability of joint adoption of SAPs (Ethiopia)

9

52.5

23.3

36.4

57.6 54.8 54.9

25.5

38

49.5

0

10

20

30

40

50

60

70

Seed only System diveronly

CT only Seed +system diver

Seed + CT Seed+systemdiv+CT

Systemdiv+Seed

CT+Seed CT+Systemdiver

Teklewold, Kassie, Shiferaw (2014) Ecological Economics 93: 85–93

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10

Effect of adoption of integrated technologies on maize income (Ethiopia)

Shiferaw et al. (2014) Weather and Climate Extremes 3: 67–79

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Why is adoption of SAPs low and slow?

• Conservation technologies – largely non-profitable in the short term – Labor intensive & largely

unproductive structural methods – Soil erosion control rather than

better water management and use – De-linked from income generation

and livelihood options • Profitable technologies: market

imperfections; policy and institutional failures – Information/extension, input markets,

credit, land policy, gender, etc – Poverty and time preferences

• Stepwise adoption of synergistic integrated innovations

11

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What works for technology adoption in small family farms?

Shiferaw, B., Kebede, T., Kassie, M., and Fisher, M (2015): Agricultural Economics 46: 1–13

Shiferaw, B., Kebede, T.A., and You, Z. (2008): Agricultural Economics 39:1-15

Wagura, S., Kassie, M., and Shiferaw, B (2014): Food Policy 49: 117–127

12

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Technology Adoption

• Drivers of variety adoption – High yields/low risks – Good market access – PVS with farmers – Seed availability and

affordability – Farmer awareness and

education • Key limiting constraints

– Information – Seed availability – Finance

Uganda: Groundnut

Tanzania: Pigeonpea

N % N % Want to adopt 777 82.2 135 56.3 • Adopted 555 58.7 81 33.8

• Lack seed supply 170 17.9 54 22.5

• Lack credit 52 5.5 0 0.0

Lack information 72 7.6 105 43.8

Do not want to adopt 96 10.2 0.0 0.00

Total Sample (N) 945 100 240 100.00 13

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Prob of adoption of groundnut varieties in Uganda (Shiferaw et al. 2015)

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2

Prob

abili

ty o

f ado

ptio

n

Per capita farm size (ha)

Unconstrained: N=555

Credit constrained: N=52

Seed access constrained: N=170

Imperfect information: N=72

14 Shiferaw, B., Kebede, T., Kassie, M., and Fisher, M (2015): Agricultural Economics 46: 1–13

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Gender issues and the unitary household model – who manages farm plots in Kenya (% of plots)

32.5 32.1

15

35.7 33.929.7 29.3

22

33

21.3

37.6 38.3

63

31.3

44.8

0

10

20

30

40

50

60

70

Maize (N=1497) Beans (N=1399) Pegion Pea(N=173)

Groundnuts(N=112)

Cow Pea (N=286)

Female Male Both equally

15

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2. Access to markets

16

Market access in agricultural areas. Source: WDR 2008 – compiled from different sources

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Market imperfections: Over extended supply chains and high marketing costs

Rural wholesaler

Transporter

Urban wholesaler

Processor

Cleaners

Rural assemblers

Brokers

Retailers

Consumer

Farmer Farmer

Segmented Segmented

17

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1,710 2,070 2,520

3,150

4,050

05001,0001,5002,0002,5003,0003,5004,0004,500

0100200300400500600700800900

Buy

ing

pric

e

Tran

spor

t cos

ts

Buy

ing

agen

ts

Cle

anin

g, s

earc

h, p

acka

ging

, loa

ding

Sto

rage

cos

ts a

nd w

eigh

t los

s

Pro

fit

Bui

ng p

rice

Tran

spor

t cos

ts

Buy

ing

agen

ts

Cle

anin

g, s

earc

h, p

acka

ging

, loa

ding

Sto

rage

cot

s an

d w

eigh

t los

s

Pro

fit

Buy

ing

pric

es

Tran

spor

t cos

ts

Cle

anin

g, s

earc

h, p

acka

ging

, loa

ding

Sto

rage

cot

s an

d w

eigh

t los

s

Pro

fit

Buy

ing

pric

es

Tra

nspo

rt co

sts

Sto

rage

and

wei

ght l

oss

Cle

anin

g, s

earc

h, p

acka

ging

, loa

ding

Pro

fit

Nai

robi

con

sum

er p

rice

Rural Assembler Rural wholesaler Urban Wholesaler Urban Retailer

Pric

es (K

sh)

Cos

ts a

nd tr

ader

mar

gin

Build Up of Costs and Prices in Pigeonpea Markets in Kenya (KES/90 kg), 2007

Costs and margins Prices

Source: Shiferaw et al., 2008 18

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Role of markets: Access • Transaction costs (TCs) of reaching

markets with outputs – The lower the TCs the more likely

farmers will adopt SAI • Transaction costs in input markets

(seed, fertilizer, etc) – Increase input prices – Reduce profitability of inputs – Labor-intensive intensification

• Improved market access is good for sustainable intensification – Improve supply of inputs at

competitive prices – Reduces self-sufficiency – Creates incentives for use of

commercial inputs

57.5

10.0 10.2

7.4

25.6

74.2

35.1

64.4

15.5

0

10

20

30

40

50

60

70

80

90

100

Malawi Ethiopia Zambia

Farmgate Village market Main/district market

19

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Malawi: Maize Prices by point of sale (MK/kg)

31.4 31.3

35.4

32.8

29

30

31

32

33

34

35

36

Farmgate (N=441) Village market (N=57) Main/district market(N=269)

Total (N=767)20

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Ethiopia Price of wheat by point of sale (ETB/100kg)

422.2

441.8 443.6

441.7

410

415

420

425

430

435

440

445

Farmgate (N=27) Village market (N=97) Main/district market(N=284)

Total (N=408)21

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Zambia Price of maize by point of sale (ZMK/kg)

2,256.3

2,509.3

2,546.7

2,489.2

2,100

2,150

2,200

2,250

2,300

2,350

2,400

2,450

2,500

2,550

Farm gate Local market District market Total 22

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Policy: Farmer organization and collective action

• Collective action crucial when: – Landscape-wide interventions – Resource use interdependence

(reciprocal externalities) – Remedy market imperfections

• But producer organizations can be costly and difficult to organize – Elite capture – Conflicting interest groups

• External intervention and supportive policies may be needed to – Organize users – Define ‘rules of the game’ – Ensure equity in benefit and cost

sharing

Buyer Season Point of Sale

Price (Ksh/kg)

PMG price advantage

(%)

PMG Soon after harvest

Farmgate

29.81 24.00

Broker 24.04

PMG 5 km

29.93 23.88

Broker 24.16

PMG 4–5 months after harvest

Farmgate

31.16 22.72

Broker 25.39

PMG 5 km 31.29 22.62

Broker 25.52

PMG = Producer marketing groups

Shiferaw et al. (2009) Af. J. of Agricultural and Resource Economics 3 (1): 1-19

23

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Policy: Infrastructure

24

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3. Access to finance

25

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Access to finance in Bangladesh M. Jahangir Alam Chowdhury, Shabaz Amin and Tazrina Farah (2016)

• Only about 35% of women (aged 15 and over) participate in the workforce compared to 82% of men (Labour Force Survey 2013)

• Access to capital has been recognized as an important factor for improved household welfare.

• Formal sector loans – collateral requirements, credit rationing and lengthy bureaucratic procedures prevent most poor households from obtaining loans.

• Testing if microcredit programs through microfinance institutions (MFIs) would work to enhance access to finance and entrepreneurship.

26

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Effect of microfinance for women in Bangladesh

• Access to microcredit increases self-employment in micro-business – 3.5% of women who have

access to microcredit are entrepreneurs, whereas only 1.3% of women who do not have access are entrepreneurs

– 39% of men who have access to microcredit are entrepreneurs, whereas 20% of men who do not have access to microcredit are entrepreneurs

• Likelihood of women becoming entrepreneurs increases by 4% when the women are members of MFI microcredit programs, but by 24% for men

• 1% increased in size of the loan increases prob. of owning a micro business by 3% (but by 14% for men)

• Female loans also increase male entrepreneurship in the household

27

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Effect of business training on female entrepreneurship: experimental evidence from Peru (Valdivia, 2014)

• Millions of women in self-employment but with low productivity

• How to increase the profitability and growth potential of businesses owned by women for poverty reduction and gender equity.

• Evaluates the impacts of a business development services program serving female micro-entrepreneurs in Lima using RCT with two treatment groups: – One received only time intensive general training (GT)

delivered by experts, – Second group received GT plus technical assistance and

advisory services (GA+TA) 28

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What works Effect of business training on female entrepreneurship:

experimental evidence from Peru (Valdivia, 2014)

• All treated showed increased sales revenues and self-reported adoption of recommended business practices, although timing differed.

• Full treatment (GT+TA) reported increased sales 4-7 months after training

• Women in GT only group were able to catch up about a year later.

• All those that were offered training increased business sales by more than 15%, about two years after the end of the training.

• Sales revenue effects from adoption recommended business practices

• Slow take up of the training may suggest some space to improve recruitment and delivery of good general business practices.

29

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4. Access to land resources • Land is the key productive asset for rural households –

fundamental for livelihoods and poverty reduction • Shrinking size of most smallholder farms over time with rising

population pressure • Leading to more continuous cultivation of fields, contributing to

land degradation and unsustainable forms of agricultural intensification

• The rise of land rental and purchase markets and changes in land allocation institutions

• Limited access to irrigation and predominance of rainfed systems in SSA and depletion of groundwater resources in South Asia

• Challenges of agricultural transformation in Sub-Saharan Africa 30

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1960-69 1970-79 1980-89 1990-99 2000-06

Ethiopia 0.51 0.45 0.36 0.25 0.20

Kenya 0.46 0.35 0.28 0.23 0.22

Mozambique 0.39 0.37 0.30 0.25 0.31

Rwanda 0.22 0.21 0.20 0.16 0.20

Zambia 1.37 1.07 0.90 0.78 0.68

Zimbabwe 0.73 0.66 0.58 0.53 0.43

Source: FAO Stat database : www.faostat.fao.org

Cultivated Land per Agricultural Person (ha)

31

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Farm Size Distribution: Small Farm Sector in Africa

012345678

He

cta

res

bottom25%

2nd 3rd top 25%

RwandaEthiopia

MozambiqueKenya

Zambia

Rwanda Ethiopia Mozambique Kenya Zambia

Source: Jayne, Mather, Mghenyi, 2006

Rwanda – land scarcity

32

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Ways to access land • Customary rights – based on affiliation to a given community • Land markets – purchase where land markets work • Land rental markets – Sharecropping or fixed rent tenancy • Lease market - through lease from state or owner • Land reform – reallocation through national governments,

often as a result of policies to correct historic injustices and to distribute land more equitably.

• Inheritance - gaining access to land as an heir. • Squatting illegally on land (e.g. open access or state property) • Claiming through “development” – e.g. investments or

clearing forests from open access or state owned land

33

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Land rights may differ depending on property rights

• use rights: rights to use the land for grazing, growing subsistence crops, gathering minor forestry products, etc.

• control rights: rights to make decisions how the land should be used including deciding what crops should be planted, and to benefit financially from the sale of crops, etc.

• transfer rights: right to sell or mortgage the land, to transfer the land to others through market and non-market mechanims

34

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Policy: Land reforms • Land redistribution, titling, registration and certification

– Radical change in land policy – Redistribution (e.g. Ethiopia) improved equitable access to land – Registration and certification also improve security of tenure

• More secure property rights and removal of restrictions on land markets have the potential to improve access and create both efficiency and equity benefits, but there are high risks of elite capture of large land areas with inefficient and inequitable outcomes.

• Success depends on political economy of land governance (transparency and accountability, equity, inclusion, community participation, land policy formulation processes) – Sequencing of land reforms – Land policy, Land laws – Land certification - youth, women, pastoralists – Good governance and administration – Rent seeking and elite capture

35

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Land certification – need for more evidence

• Would improving land governance and registration enhance investments by small and medium farmers?

• Would certification per se improve equitable access – women, pastoralists, youth?

• Would certification for use rights improve security and rental markets – e.g. Ethiopia, but does not prevent fragmentation or increase sustainability investments?

• Lack of spatially explicit, reliable and current registration data for transferability and use of land as collateral

• Lowering costs of registration, transfer taxes and dispute resolution and market based transfers for equity and efficiency

36

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Summary Policies for Land Governance

1. Understanding the landscape, diversity and the mixed story – e.g., growing land scarcity with narrative of land abundance in Africa

2. Current shift in policy to medium and large commercial farms (e.g. ‘land grabs’) reduced access to land by smallholders

3. Lack of clarity on the goal of land policy - disconnect and conflicts between equity, efficiency and growth objectives

4. Lack of models and evidence on linking large private investments and agribusiness with smallholder farmers (contract farming, out growers, finance, inputs, etc)

5. Need to vary land policy across countries based on land availability, customary rights, poverty reduction, food security and sustainability

6. Need for broad set of policies to address land scarcity, unemployment and insecurity of rights (e.g. non-farm options to curb migration and reduce youth unemployment)

37

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Thank You

38

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Challenges for future: Population growth

0

1000000

2000000

3000000

4000000

2010

2013

2016

2019

2022

2025

2028

2031

2034

2037

2040

2043

2046

2049

2052

2055

2058

2061

2064

2067

2070

2073

2076

2079

2082

2085

2088

2091

2094

2097

2100

Population projections Medium fertility scenario

East Asia & Pacific Europe & Central Asia Latin America & CaribbeanMiddle East & North Africa South Asia Sub-Saharan Africa

Source: adapted to World Bank regions using data from United Nations, Department of Economic and Social Affairs, Population Division (2013). 39

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Conclusion Access to technologies

• Smallholders face major challenge in adopting and adapting SAI – Weak extension and inadequate

information – Markets to access key inputs/technologies – High input costs and credit constraints – Poor market linkages and seasonality of

prices – Weak rural institutions

Policies and institutional innovations

– Improve access to information (extension) – Improve markets and value chains to

enhance access to technology and inputs that make SAPs attractive

– However, market access is necessary but not sufficient for SAI

– Complementary policies to remedy market failures and synergistic use of technologies

– Targeted and time-limited subsidies with high net social benefits can induce SAI

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1961

1964

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

Area

har

vest

ed a

nd P

rodu

ctio

n

Yiel

d

Area, production and yield of maize in Ethiopia (1961 - 2011)

Yield (tonnes/hectare)Area Harvested (million Ha)Production (million tonnes)40

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Smallholder Market Participation

18

46

32

4

0

10

20

30

40

50

% h

ouse

hold

s

Sell only Buy only Both NeitherSource: ICRISAT Data, 2005, Eastern Kenya (N=400)

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Page 42: Bekele Shiferaw Partnership for Economic Policy - … · 2016-06-03 · Development for All . ... Soil erosion control rather than ... M. Jahangir Alam Chowdhury, Shabaz Amin and

Property rights to land • Common property – regulated access by

community • Open access – unregulated access to all • Private ownership (freehold with title deeds) • Leasehold or usufruct property – leased or use

rights on state owned land with limited rights for transferability

• State property (e.g. wildlife reserves, parks, lakes, rivers, forests, etc.)

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Page 43: Bekele Shiferaw Partnership for Economic Policy - … · 2016-06-03 · Development for All . ... Soil erosion control rather than ... M. Jahangir Alam Chowdhury, Shabaz Amin and

Land certification – does it work? • In Ethiopia, radical land reform (1975) - all land is state owned and farmers have

use rights only

• Holden et al. (2009) use three rounds of panel data to assess whether certification has resulted in more investment and higher land productivity in the Tigray region in Ethiopia, seven years after land certificates were received.

• After controlling for endogeneity in the allocation of certificates, they find that receipt of land certificates has resulted in better maintenance of soil conservation structures and more planting of trees on certified land in Tigray. They also find that land productivity has increased 40–45% on certified land, a sign of land use intensification.

• Similarly, Deininger et al. (2011) find that land certification has enhanced tenure security and investment in the Amhara region in Ethiopia. The strong observed effects in Ethiopia are likely to be due to high tenure insecurity invoked by the previous radical land reform, with weak user rights and frequent land redistributions.

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