Kinship, transaction costs and land rental market participation

With land being the main source of income for many people in the developing world, security of access or ownership rights is imperative to the alleviation of rural povety. Past polices of land redistribution, prohibition of land renting and later legalisation of short-term contracts only, may have prevented or undermined tenancy markets in Ethiopia. This paper examines the allocative efficiency of the land rental market in Northern Ethiopia, and the extent to which adjustment in the tenancy market is constrained by transaction costs. Attention is also paid to the extent to which kinship ties may influence and transaction costs.The main findings of this study include:tenants face lower access constraints in villages with high prevalence of kinship contractsthere is a large variation in the extent of participation in the land rental market across the 16 surveyed villagesvariation in local leadership may contribute to the local variation in how the market functionsadditional research should focus on explaining this variation and how new policies granting more secure rights and allowing more long-term leasing contracts may affect the efficiency of the land rental market, and the consequent impacts on land use efficiency and management.