Land Rental Markets: Experimental Evidence from Kenya

Investigators: CDEP Affiliate Jack Willis, Michelle Acampora and Lorenzo Casaburi

Agriculture is the main source of livelihood for over half of all households in Sub-Saharan Africa, yet markets for its key input, land, function far from perfectly, often resulting in most plots being farmed by whoever inherited them. Land market incompleteness has far-reaching consequences for the economic lives of the poor and is often considered a major obstacle to increasing agricultural productivity and to economic development (Deininger et al., 2017). While it is a topic of active debate in policy and academia centers, experimental evidence on the determinants of land market participation and its effects is virtually non-existent.

This project brings experimental evidence to this debate. We undertake a randomized controlled trial in Western Kenya in which we offer landowners subsidies to rent out one of their plots, thus inducing marginal land rentals, and compare their effects to those of an equivalent unconditional cash grant. Our design allows us to identify who selects into land markets at the margin, to compare renters to owners and contrast their agricultural choices and outcomes on the rented plots, and to identify how owners’ outcomes, such as food security, non-farm labor and migration, change upon renting out part of their land. In turn, the findings add not only to our understanding of land market frictions, but also to their interaction with frictions in markets for other inputs, such as labor, credit, and management.  

The project is part of CDEP’s Firms and Innovation Initiative.