The Diversity of Land Institutions in Europe - Working Paper

In previous reviews, we have already seen the importance of inheritance law and land titling on development outcomes. Swinnen, Van Herck and Vranken's paper  "The Diversity of Land Institutions in Europe" looks at land institutions related to farming in EU context and shows both the large diversity within a single market and how policy decisions can have large effects in relatively short periods of time.

Abstract:     

"The creation of optimal land institutions attracted renewed attention in the 1990s because of its central role in the transition process in former Communist countries in the former Soviet Union and Eastern Europe and more recently because of large-scale land investments in developing countries. This paper documents the existence of large variations in land institutions (markets and regulation) using current and historical data from Western and Eastern Europe. It then offers explanations for these differences and draws implications for the role and optimality of land institutions in development (with special reference to the current debate on large scale land acquisitions)"

 

It is interesting to see how much diversity there is among EU countries, both within the EU15 and former communist, specially in a setting where there is not only a common market but also a Common Agricultural Policy (CAP). These differences not only point at history but also to more recent policy decisions in land restitution (former communist), rental environment, and farmland regulatory framework. While the study does look at land institutions per se, it is a pity there has not been a deeper look at the impact of the CAP on those institutions, aside from a passing mention in the case of Greece (the requirement of rental agreements have led to an increase in formalization).

This also shows that there are many paths to a functional agricultural land market and that both institutional design and political/policy considerations loom large. Land reform is still in the agenda of many developing countries, although not as much in its traditional shape (social justice) and rather as economic (mostly export led) growth argument. The acceptance of multiple pathways with endogenous development within a common external framework reinforces the point that 'cookie cutter' policy proposals by external actors are a misrepresentation of the policy options at hand

 

Interesting to note that one of the largest countries both in farmland and agricultural production within the EU, Spain, is not part of the analysis. The authors do not give an explanation so we are left guessing. Selection bias? quality of data?

 

 

 

 

Non-Farm Enterprises in Rural Africa: New Empirical Evidence - Working Paper

Probably the biggest takeaway from Nagler and Naude's "Non-Farm Enterprises in Rural Africa: New Empirical Evidence" is the recognition that 'Africa is not a country', or as they put it: Heterogeneity. They compare data from six countries and data diverges significantly as dynamics are tied to local context, not only at national level but also at sub-national. Nevertheless, the issue of non-farm enterprises remains key in many African (and other) countries, and this paper highlights it quite well.

 

Abstract:     

"Although non-farm enterprises are ubiquitous in rural Sub-Saharan Africa, little is yet known about them. The motivation for households to operate enterprises, how productive they are, and why they exit the market are neglected questions. Drawing on the Living Standards Measurement Study -- Integrated Surveys on Agriculture and using discrete choice, selection model and panel data estimators, this paper provide answers using data from Ethiopia, Niger, Nigeria, Malawi, Tanzania, and Uganda. The necessity to cope following shocks, seasonality in agriculture, and household size can push rural households into operating a non-farm enterprise. Households are also pulled into entrepreneurship to exploit opportunities. Access to credit and markets, household wealth, and the education and age of the household head are positively associated with the likelihood of operating an enterprise. The characteristics are also associated with the type of business activity a household operates. Rural and female-headed enterprises and enterprises with young enterprise owners are less productive than urban and male-owned enterprises and enterprises with older owners. Shocks have a negative association with enterprise operation and productivity and a large share of rural enterprises does not operate continuously over a year. Enterprises cease operations because of low profits, a lack of finance, or the effects of idiosyncratic shocks. Overall the findings are indicative that rural enterprises are "small businesses in a big continent" where large distances, rural isolation, low population density, and farming risks limit productivity and growth."

Some points to note from the study:

- entrepreneurship have had a very urban focus, and when it comes to the rural areas the focus is on agriculture. The study show the importance of non-farm enterprises in smothing shocks and providing additional income

- Most livelihoods and entrepreneurship interventions focus on the individual. However,
in this context, enterprises are a household activity (both in decision making and operation), specially taking into account distribution of labor according to seasonality (planting and harvest), number of available workers and household tasks (and gender-based allocations).

- Response to shocks (drought, price, conflict) is a major reason for enterprise creation, however not all shocks have the same effect on the choice of sector. Many differences are country specific (different responses to the same kind of shock). Moreover, productivity of enterprises born out of necessity (shock response) is lower than those out of choice. This may help us rethink the programming 'mix' regarding both prevention and response to crisis.

- In some cases, education was positively correlated with entrepreneurship, probably due to the fact that educated individual do not have a comparative advantage in a rural setting where waged employment is limited and therefore reallocate into self-employment. The role of education (or the kind of) in rural settings have to be thought further.

- Each non-farm sector has its own profile. The variables studied (education, number of adults in the household, age and credit access) have different effect depending on the sector: agribusiness, sales, trade, restaurant, professional services, etc...

- Distance to population centers. Highlighting the importance of rural secondary towns and cities, as enterprises located up to 10 km from a population center are the most productive (on average urban enterprises are more productive than rural). Productivity drops significantly when they are more than 50 km away. Large gains in poverty reduction have actually been linked to secondary cities rather than major cities or capitals.

-Youth. Younger households are not only less productive but also less probable to engage in non-farm entrepreneurship in comparison with middle age groups. To note this is talking about household heads, and not necessarily individual engagement in activity.

- Seasonality and enterprise life. Agriculture remains the key driver in many rural settings and non-farm enterprises adapt to that cycle. Enterprises, in many cases, appear/grow and disappear /decrease according to the planting and harvesting needs, and not necessarily seen as permanent activities

- Exit reasons. The most self-reported reasons of enterprise termination are low profitability, lack of finance, unreliable supplies, as well as the impact of  death or illness in
the family (specially in settings with limited insurance or social protection)

While this paper provides and overview might be good for getting ideas where to look further, we would be better off going into country specific studies when it comes to programming and policy recommendations/development.