Impact of land certification in Amhara

1. Impact of land certification in Amhara on tenure security, investment and rental markets By Deininger, Daniel and Tekie World Bank: March 9-10, 2009 Washington DC

2. Motivation The demand for secure property rights to land • Need for investment to increase agricultural productivity & sustainability • Increasing urbanization, escalating land prices, governance challenge • ‘Scramble’ for land in wake of bio-fuel boom (speculation) Supply-side factors • New land legislation in much of Africa in 90s • Advances in IT and remote sensing reduces cost But why has so little happened on the ground? • Technical or institutional obstacles? • Limited benefits compared to cost? • Political reasons? Ethiopia as an interesting case • Huge program (25 mn plots) quite rapidly implemented; little outside ass. • Turns conventional wisdom on its head • Participatory local process - rather than expert driven • Confers non-alienable rights - and plenty of remaining policy restrictions • No spatial reference at all – contrary to surveyors

3. Tenure security effects Evidence of tenure security effects • Investment effects (virtually everywhere) • Higher land values, housing investment in urban areas • Ability to transfer land to better uses • Less need to guard assets: Formal labor markets, child labor • Governance, conflict corruption, and institutional performance • Will be more pronounced if insecurity high But their realization depends on a few preconditions • Recognition of local arrangements rather than imposition of new models • Equity effects if there is no broad access to information • State presence and ability to enforce • Institutional and economic sustainability (cost-effectiveness)

4. Transferability & credit effects Rationale: Reliable information on ownership • Assures against dispute if rented out • Reduces transaction cost associated with transfer • If formalized for sale can be used as collateral for credit Evidence on rental evidence • Increases in relevance with emergence of off-farm sector (Vnm) • Allows to increase productivity through transfer to non-relatives • Magnitude between 60% and 20% Credit market impacts • Credit-worthy projects a precondition • Many potential limitations (foreclosure, liquidity) • Institutional and economic sustainability (cost-effectiveness)

5. Policy environment Evolution of Ethiopia’s rural land policy environment • Feudalist structure followed by nationalization (state/communist property) in 1975 • A number of redistributions b/n 1975 and 1997 • 1991 reforms; 1995 constitution w. guaranteed access • 1997 decentralization of responsibility to regions Reasons for high tenure insecurity • 1997 Amhara redistribution • Federal vs State power on land issues; 2005 federal proclamations tries to reign in regional autonomy • Urban and agro-industrial expansion (flowers); possibility of biofuels • Leasing still restricted everywhere except Amhara • Led to pressures on improving security

6. Program characteristics & hypotheses Main features • Democratically elected LAC has responsibility • Field-based adjudication process (elders to resolve conflict) • Certificates with holders’ pictures but no map (added in 2nd stage) • Very cost-effective ‘1st stage’ (< 1 US$/parcel) trad’l methods 2nd stage Process characteristics (from nation-wide survey) • Public meetings held, LACs with members from most sub-kebeles • High share of field-based adjudication • Only 5% of unresolved conflicts (vs. 20%+ in Thailand) Case study/survey evidence on possible impact • High willingness to pay to replace certificate • Reduction of conflict • Gender (women’s pictures, awareness where stored); polygamy

12. Data and general approach Data sources • 4-round panel (1999, 2001, 2004, 2007) from 7 villages in East Gojam • Some 900 households with 4,000 plots in each round • 3 rounds before implementation, some certified in 4th round Identification strategy • Define villages as treated if certified > 12 months ago • Control for household fixed effects • Verify that there is little difference in time-varying effects • Conservative estimate for two reasons • Even in treated villages not all households have certificates • Many households in untreated ones had certificates Expected short-term impacts • Perceived tenure security • Investment • Rental market participation

17. Outcome variables considered Perception of admin. land size change next 5 years • Recent land redistribution • Uncompensated expropriation for urban expansion • Both loss and increases relevant (political pressure) • Question included all 4 years Investment in soil & water conservation structures • Should see a direct investment effect • Existence and new construction • No of hours spent in maintaining/constructing Land rental market participation • Amhara the only region where no constraints in terms of length • Both participation and area transferred

19. Risk of land loss Equation to be estimated use Chamberlain’s method

21. Investment & rental market Plot-level investment equation Household-level rental market participation

26. Policy implications for Ethiopia Ensure sustainability of impacts • Political economy very interesting (accident) • Establish mechanisms for regular updating (computerization) • Add spatial element (satellite imagery) • Systematically include CPRs • Demarcation & dealing with encroachment • Rules for internal management • Enforcement mechanisms Enhance benefits through policy changes • Land leasing & off-farm employment • Threat of redistribution/enforcement of LT contracts • External threat from expropriation Explore longer-term effects • Already benefit much beyond cost • But could be much larger (& very cost-effective) • Especially with policy changes

27. Broader implications Local rights recognition can have significant impact • Can be implemented cost-effectively ($1.5 w. satellite image) • Benefit likely to exceed cost in most situations • Communal arrangements can be relied upon, unless high inequality Replace titling with recognition of rights • Both individual and communal rights • Work on specific arrangements for the latter • Use as basis for institutional mechanisms (local democracy, updating) Need for quick & comprehensive action • Rush for biofuels & commodity boom increases land values • Unless rights are recognized, this can lead to large-scale dispossession • Legal basis exists in most African countries • But implementation is sorely lacking & even some backsliding • This is not land reform - but may prevent the need for one in the future