Land Rental Markets: Experimental Evidence from Kenya
Land market incompleteness is argued to have pervasive effects in Sub-Saharan Africa, including on agricultural efficiency, equity, and structural transformation. Yet experimental evidence on land market participation is virtually non-existent. We randomly allocate subsidies for agricultural rentals in Kenya and study who selects into land markets, what renters do differently from owners, and the resulting effects on agricultural and owner outcomes. The induced rentals increase equity - reallocating plots to farmers who own fewer plots and are younger and more market-oriented - and persist beyond the subsidy. Renters increase output and value added on the rented plot, by more than owners under an equivalent unconditional cash transfer, and they do so by increasing commercial crop cultivation and non-labor inputs, rather than labor. Although owners cultivate less land under the rental subsidy, their non-agricultural labor decreases. The results shed light on the nature and magnitude of land market frictions, and on their interactions with other missing markets.
We wish to thank Tasso Adamopoulos, Kevin Donovan, Doug Gollin, Selim Gulesci, Gunther Fink, Kelsey Jack, Paul Niehaus, Diego Restuccia, Mark Rosenzweig, Nick Ryan, Eric Verhoogen, and seminar audiences at Barcelona Summer Forum, Basel, Ben Gurion, BREAD, CEPR/Misum/SITE, Cattolica Milan, Columbia, Japan Empirical Economics Seminar, LEAP, Naples, Northwestern, NOVAFRICA, NYU Abu Dhabi, Paris-Dauphine, STEG, University of Southern California, Tilburg, Tinbergen, Trinity College Dublin, USC, Venice, Williams and Yale for useful comments. We thank Carol Nekesa, Winnie Ariya, Kadoro Mwaniki, Winfred Sakwa, and the entire REMIT team for their excellent work in managing the field activities. We are grateful to Nikolas Anic, Philippe Brugger, Maria Cedro, Hamza Husain, Malavika Mani, Nicholas Oderbolz, Flurina Schneider, and especially Jack Skelley for excellent research assistance. The project was funded by the Swiss National Science Foundation (Eccellenza grant), to whom we are very grateful. The experiment was registered at the AEA RCT registry, ID AEARCTR-0004530. All errors are our own. We declare that we have no relevant or material financial interests that relate to the research described in this paper. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.