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We use nationally representative survey data from two neighboring countries in Southern Africa – Zambia and Malawi – to characterize the current status of rural land rental market participation by smallholder farmers. We find that rural rental market participation is strongly conditioned by land scarcity, and thus is more advanced in Malawi than in lower-density Zambia. In both countries, we find evidence that rental markets contribute to efficiency gains within the smallholder sector by facilitating the transfer of land from less-able to more-able producers. However, we also find evidence of significant transactions costs, which may hamper such gains. Evidence of welfare impacts of rental market participation is mixed, with generally positive impacts accruing to tenants and (to a lesser extent) landlords in Malawi, but negligible impacts in Zambia, where rental markets are still in their infancy.
