Communal Land and Agricultural Productivity

Communal land tenure is prevalent across many developing countries. It implements a “use it or lose it” principle that allows owners to farm their land but restricts their right to transfer it away. This paper measures the distortionary impact of communal land in a dynamic general equilibrium model of occupational selection, calibrated to Ethiopia. We find that lifting communal land tenure increases GDP by 9% and lowers agricultural employment by 18 percentage points. While agricultural productivity increases, that of non-agriculture drops. Communal land tenure helps rationalizing about one-half of the relative agricultural productivity gap in the poorest economies. Its impact on aggregate productivity, though, is comparatively minor.