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Policy Research

WVORKINGPAPERS
Agricultural Policies

LatinAmerica andtheCaribbean Technical Department andthe Agriculture andRural Development Department TheWorldBank July 1993 WPS1164

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Power,Distortions, Revolt,and Reform in Agricultural Land Relations

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HansP.Binswanger KlausDeininger and GershonFeder

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If the efficiencyof the largecommercialfarm is a myth,whydo marketsfor the rental and saleof agriculturalland rarelyreallocate land to the most efficientuses and users (familyfarmers)?
PoUcyRcarch Wosking Papczsdisseninatothe findings of work in progress andencourage the exchange of ideas among Bank staff and alodtcsintrestedindvelopmentisues Thesepapers,disuibutedbytheRescarchAdvisoyStaff,carry thenamesoftheauthors5reflect ordytheirviews,andshouldbouseda ndcitedaccordingly.Thcfindings,interpreutions.andconclusionsamtheauthors'own.nTcyshould na be attributedto the World Bank. its Board of Directon, its management,or any of its member countries.

~~Polloy Research

Agricukural Policese WPS1i64

This paper -a productof the AdvisoryGroup,LatinAmericaand the CaribbeanTechnicalDepartnent and the AgriculturalPoliciesDivision,Agricultureand RuralDevelopment Department - was prepared for the Handbookof Development Economics,VolumeII, edited by Jere Behrmanand T. N. Srinivasan. Copiesof this paper are availablefreefrom theWorldBank, 1818H StreetNW,Washington,DC 20433. Please contactHansBinswanger,rooml4-021, extension31871(July 199^, 121 pages). Most workon the relationshipbetweenfarmsize and productivitystronglysuggeststhat farmsthat rely mostlyon familylabor are moreproductive than large farms operatedprimarilyby hired labor. This study began as an inquiryintohow rental and sales marketsfor agriculturallandin the developingworld affectefficiencyand equity.What emergedwas lie clearsense that great variationsin land relationsaroundthe world and over time cannotbe understoodin the commonparadigmof propertyrights and competitivemarkets. Underthat paradigm,land scarcity leadsto betterdefinitionof rights,which are then traded in sales and rental markets accessibleequally to all players.The outcome shouldbe the allocationof land to the most efficientuses and users, yet this rarelyhappens. Instead,land rights and ownershiptendto growout of powerrelationships.Landowning groupshave used coercionand distortionsin land, labor,credit, and commoditymarketsto extracteconomicrents from the land, from peasantsand workers,and most recentlyfrom urban consumergroupsor taxpayers.Suchrentseekingactivitiesreduce theefficiencyof resourceuse, retardgrowth,and increasethe povertyof the ruralpopulation. Binswanger,Deininger,ard Feder examine how thesepower relaJons emergedand what legal meansenabled relativelyfewlandownersto accumulateand ho'd on to large landholdings. They discussthe successesand failuresof reform in market and socialisteconomies,and the perversionsof reformsin both systems,manifestedin large commercialfarms and collectives. They surveythe history of land relationsand the legaciesthat history leaves.Theydiscussthe three analyticalcontroversiessurrounding economiesof scale, and the efficiencyof the land sales and land rentalmarket. Tley discussthe mainpolicy issuesand implicationsof variousdistortionsand successful and unsuccessfulreforms in the developing world,includingland registrationand titling, land taxation,regulationsrestrictingland sales and rentals,fragmentationand consolidation of land, redistributive land reform,and decollectivization. In an epilogue on methodology,theyexamine howvarious strandsof economictheoryhave contributed,or failcd to contribute,to the explanationof variationsin policies,distortions,and landrelationsover spaceand time.

The PolicyResearchWorkingPaperSeriesdisseminates therndingsof work underwayintheBank.Anobjectiveoftheseries is to get these findingsout quickly, cven if presentationsare less than fully polished.The fimdings, interpretations, and conclusionsin these papersdo not necessarily representofficialBankpolicy. Producedby 'he PolicyResearchDisseminadon Center

POWER, DISTORTIONS,REVOLT AND REFORM IN AGRICULTURAL LAND RELATIONS

Hans P. Binswanger,Klaus Deininger, and Gershon Feder

Prepared for the Handbook of DevelopmentEconomics, Volume m, Jere Behrman and T.N. Srinivasan, editors.

The authors of thJ paper have benefittedfrom dcauslons at the Asian Dvelopment Bank, the Land TenureCenter at the Universty of Wisconsin, the Universityof Minnesota,and the World Bank Writtencommentsand suggestxionby AS.P. Brandaw,D. Bromley,J. Bruce, M. Carter, R. Christiansen,E Hayaml, M. Lipton, S. Migot-Adholla,K Otsuka,M. Roth, V.Rutan, and TN. SrWnivasan wereparticularly helpfid.

TABLE OF CONTENTS Glossary Introduction Part I: 1. 2. 3. The Historical Legacy The Emergenceof PropertyRightsin Land ExtracdngTributeand Rent from Peasants Successand Failurein Reform

Part II: 4. 5. 6.

AnalyticalControversies Farm Size and Productivity The Effectsof Land-CreditLinksand Policy Distortionson LandSales Markets Incentives,Land-CreditLinksand Land Rental Markeu

Part III: PoUcy 7. S. 9. 10. 11. 12. 13. Land Registaion and Xtling Land Tax LimitingLandSales Regulations and Consolidation Fragmentation Restrictionson Land Rentals LandReform Redistributive Decollectivization

Epilogue on Methodology Annex 1: Annex2: Bibliography Intervention to Establish and Support Large Famns How Market LnperfectionsAffect the Farm Size - Productivity Relation

GLOSSARY Irrespective of their historicaland culturalor Ideologia origins, the followingterms are used In this paper with the definitiongivenbelow: Co.2ectlve Farm: A farm jointlyownedand operatedunder a single management for the benefitof and with work inputfrom the owners of the collective. CommuWaCwnershp System: A systemof land ownershipin whichspecificplots of land are whileother areas are held in to membersfor familycultivation, assignedtemporarilyor permanently commonfor pasture,forestry,and collection of wildplants and gamo. Individualplots mayor may are not be inheritableor tradeablein internalrental or sales markets. But sales to nonmembers approval. alwaysforbiddenor subjectto community ContractFannlng. A contractbetweena farmerand a p-archr 'er in advanceof the growingseason for a specificquantity,qualityand date of deliveryof an agricultural outputat a price or price formulafixedin advance.The contractprovidesthe farmer an assuredsale of the crop and sometimes providesfor technicalassistance,credit, servicca,or inputsfrom the purchaser. the serviceof draft animalprovidedby serfs, tenants,or Cori*: Unpaidlabor and sometimes usufructright holderto the ownerof the manorlalestate. Debt Peonage,Bonded LaborSeries: A tributepaymentor labor serviceoriginatingin a defaulted loan. Family Fanm:A farm operatedprimarilywith familylabor, withsome hiring in or out of labor. Familyfarmingsystemsmay be sociallystratified,with widedispersionin farm sizes and technology levels. Radenda. A manorialestate in whichpart of the land is cultivatedas the homeharm of t'e owner right holders, or tenants. and part as the familyfarms of serfs, usufrctuaury holdingculdvated'Jy the lord, Home Farm: That part of the manorialestate or large ownership landlordor owner under his own management using corvdeand sometimes partly remunerated labor. by tenantsor usufructuary Landlord Eftate:A manorialestate in whichall of the land is cultivated right holders. set of commodities operatedunder Junker Estate: A large ownershipholdingproducinga diversified a singlemanagement with hired labor. Laborersdo not receivea plot of land to use for their own culdtivation as pant of their remuneraton, exceptperhapsfor a house and a garden plot. Large Commerdcal Farm:A large ownershipholdingproducingseveraldifferentcommodities operatingunder a singlemanagement with a high degreeof mechanization using a few long term hired workerswho do not reside hired workerswho may resideon the farm and seasonally permanentI)on the farm. Manodl Estate: An area of land allocatedtemporarily or as a permanent ownershipholdingto a manoriallord who has the right to tribute, taxes, or rent in cash, in kind or in corvdelabor of the peasant residingon the estate. ITis paper uses the sme term whetherthe peasantsare there by
1

choiceor are bound by restrictionson their mobility. Manorialestatescan be organizedas ha,<indas or as landlordestates. Rcat is used in severalways: * Rsudrfa t 'hTe residualpaymentto a productivefactor in inelasticsupplyafier all factorshave been renumerated at their respective marketrates, whetherthe other marketsare competitive or not. * Rent-secing rent. The additionalreward receivedas a result of regul-tionsand restrictionsthat raise the level of rewardsabove its undistortedlevel. Wheremarketsare thin or uncompetitive, measuringrent-seeking rent may be very difficult. * Land rent: A tenant'spaymentto a landowner in a voluntarycontractual relationship. Rent may be paid as a fixedor share paymentin cash, kind, or iabor sarvices. It may or may not be equalto residualren If the reservation utilityof tenantshas been reducedby distortionsassociatedwith rent seeking, the land rent includesa component of rent seeking. Reservraon udiky or reserwtion wage.The level of utility (includingthe risk ataibutes)or the wage whichis availableoutsidethe manorialestate to a potentialtenantor workeron a manorialestate. Share contract:A rental contractin whichthe tenantis payinga portion or all of his rent by deliveringa certainproportionof the output, the crop share, to the landowner. SatJbnws: A farm belongingto the state andoperatedlike a Junker estate or a large commercial farm under a singlemanagement with a largely residentlabor forcepaid in wages,and sometimes, profit shares in cash or in kind. Laborersmay be allocateda smallgarden plot. Swplhw: Outputor labor availableover and abovethat requiredto reconstituteand maintainthe energy and life of peasants,serfs or slaves. bsa.e: A paymentin cash, kind or labor servicesto a landlordbased on restrictionson mobility and/or other forms of state-sanctioned coercion. Tributemay also be calledrent or corv6e. U qtfauatVuarj ,fghi . Rightsto use the land. May be temporary,long-term,lifetime,or inheritable, but alwaysexcludethe right to unrestrictedsale of the land. Wage, aanton: A large ownershipholCing specializing in a single crop under a singlemanagement using wage labor, a large share of whichresideson the plantation but does not receive more than a garden plot for self cultivation as part of the remunion.

INTRODUCTION This paper beganas an inquiry into the efficiency and equity consequences of rental and sales marketsfor agricultural land In the developing world. Mostof the workon the relationship betweenfarm size and productivitystronglysuggeststhat farms that rely mostlyon familylabor have higherproductivitylevelsthan large farms operatedprimarilywith hired labor. If that Is so, why have marketsfor the rental and sale of agricultural land frequently not reallocated land to famUyfarmers? Why do extraordinarily unequaldistributions of ownershipand operational holdingspersist in many parts of the world?Why has land reform seemedto be necessaryto changetheseland ownership distributions? What beganto emergefrom this studywas the clear sense that the great variationsin land relationsfound acrossthe world and over time cannotbe understoodin a simplepropertyrights and marketsparadigm.Section2 explainsthe idealizedsequence of the emergence and definitionof propertyrightswhichoccurredin only few areasof the developing world. As that paradigmwould have it, increasingland scarcityleadsto better definitionof rights, whichare then traded in sales and rental marketsthat are equallyaccessible to all players.The outcomeshouldbe the allocationof land to the most efficientuses and users. Yetthis oftendid not happen,as great observeddeviationsfrom efficiency demonstrate. An examination of the historicalevolution of land rightsshows the reasonfor the deviations:rights over land and the concentration of ownershipobservedin most developing countries at the end of WorldWar II are outgrowts of power relationships.Landowning groups used coercion and distortionsin land, labor, credit, and commodity marketsto extract economicrents from the land, from peasantsand workers, and more recentlyfrom urban consumergroupsor taxpayers.Such rentseekingactivitiesreducedthe efficiency of resourceuse, retardedgrowth,and increasedthe poverty of the rural population.How these power relationsemergedand what legal meensenabledrelatively few landowners to accumulate and hold on to large landholdings. The terminology describing agriculturalproductionrelationsvaries as muchas the relationsthemselves do. We use a consistent set of terminologyand providea glossaryof definitions.'

A lag litete eaboratstheimi",*on of paa modelof land ue follwingtheutcad of v. Thuen for th optimal u# of land . aociad problems of localiedmonopolies (Fujita andThib
3

BIecse land ownershipdistribution has often been determinedby power relationships and disortions, and becuse land sales marketsdo not distributeland to the poor (the key pointof secton 5), land reform has oftenbeen necessaryto get land Into the hands of efficientsmall fazily owners (section4 showsthat they are indeedefficient). The successesand failuresof reform in marketand socialisteconomies and the perversior of reforms In both these systems,manifestedin large commercialfarms or collectives,are discuss&;3 section3. The social cost of failingto undertakereform-peasant revolt and civil war-arealso considered. But land reform wouldnot be necessaryif there were economies of scale in agriculturebeyondthose that a familycouldtake advantage of with a givenlevel of technology. In that case it wouldnot have been necessaryto use power to aggregatelarge holdingsor coercionand distortionsto recruitworkers. And in modemtimesit wouldnothave beun necessaryto subsidiza lage commercialfarms so heavilythrough credit subsidiesand other distortions.Voluntary tasactions in undistortedmarketswouldhave achievedtheseends, and smallpeasantsmighthave found it attractiveto join collectives. Section4 examinesthe workthat hitsbeen done on the presence-ornot- of economies of scale in agriculture,Plnding in measurenients of the relative effcienc of small versuslarge farmis only exceptional cases whichare consistentwith the mythof the efficientlarge farm. Similarly,if land sales marketscouldalloczwe land from inefficient large owners to small familyfarmers, lana reform would not be necessary.Abolishing the specialsubsidiesto lage fas and the conditionsthat permit coercionwouldbe all that wouldbe required to leadto the brekup of large farms throughsales to small farmers. Showingwhy sles marketsare oftennot capableof facilitatingthese efflciency-twhancing transfers- covariance of risks, imperfections In credit markets,distortionsin commoditymarketand subsidiesto large farms are amongthe reasonsis the topic of Section5. Section6 then showsthat tenacy and sharecropping are not as ineffAcient as often assumed.They are secondbest adaptations to incomplete or distortedmarketsfor labor, credit, and risk diffulsion. Such rental agreementsare also necessaryto allowlarge ownershipholdingsto be

1986),rgi and urbon plniig, andthe dorminant of lad values(RndallandCastle1985).7he rifarmis citedprovide a goodoveviewof thislitratr 4

I (...oa _ned

oprated by tent

tenancyor outlawingit has perverse as smallfamilyfarm units. Regulating

and equity effectsfor the poor. efficiency The sectionsof the paper are groupedin k ee parts. Part I coversthe historyof land surrounding analyticalcontroversies relationsand the legaciesit leavestoday. Part II coversthe whree of the land rental and the land sales market. Part m discusses of scale, and the efficiency economies and successfuland unsuccessful the major land policy issuesleft behindby the variousdistortions land registrationand titling, lar.d taxation,regulations world. These iniclude reformsin the developing land reform and of land, redcstributive limitingland sales and land rentals,fragmentation using the insightsgainedin the previoussections. are discussed Policy implications decollectivization. epilogueexamineshow var:ousstrandsof economic Finally,the methodological of variationsin policies,distortions theory have contributed,or failedto contribute,to the explanation and land relationsover spaceandtime. PART I: THE HIS RICAL LEGACY

1. The energence of property rights In lhnd At low 7Te critical issuein land-ablndantsettingsis accessto labor, not lancd. densities,there is no incentiveto investin soil fertility, and becausefertilityis restoredby population Whenpopulationdensities long-treefallow,ownershipsecurityis not requiredto induceinvestment. cultivated.Then plows, rise, fallowperiods are graduallyshorteneduntil the lRndis continually methodsare requiredto maure, artificialfertilizers,and other invesmentsand labor-intensive maintainsoil fertlity (Boserup1965,Ruthenberg1980,Pingaliet a., 1986).Marginallands are also still to makethem productive.Now ownership broughtunder cultvation requiringhigher investments As the demandfor for makingthe required investments. securitybecomesan importantincentive rises, the issueof land as collateral in land improvements credit to financeinputs and investments becomesimportant. privaterightsto land emergein a slow and lTus as populationdensityincreases gradualprocess that exhibitsgreat regularity(figure1, arrows1 to 4). Boserup's(1965)discussion of this proces is unsurpassedand so is quotedhere at length:

Virtuallyall the systemsof land tenure found to exist before the emergencyof private property in land seemto have ihis one feature in common:certain familiesare recognizedas havingcultivation rigihtswithina givenarea of land whileother families are excluded.... 'Free' land disappears alreadybefore the agriculturalstage is reached.Tribes of food collectorsand huntersconsiderthat they have exclusiverights to collectfood and to hunt in a particulararea.... Under the systemof forest fallow,all the men,bersof a tribe .... have a generalright to cultivateplots of land.... Tbis gerera' right to take part in the cultivation of the land whichthe group dominates- or imaginesto dominate- can never be lost for any memberof the cultivatorfamilies.They may voluntarilyleave the territory for a time, but they can then reclaimtheir right whenthey return .... .a distinctionmust be made betweenthe generalcultivation riZht- as described above- and the more specificright a familymay have to cultivatea par,cular plot of land. Under all systemsof fallowa familywill retain the exclusive right to the plot it has clearedand cultivateduntil the harvest has been reaped.... But if, after the lapse of the normalperiodof fallow,the familydoes not re-cultivate a givenplot, it may lose its right to this particularplo; .... Thus,the general cultivation right is an inseparableelementof the statusas memberof the tribe and, therefore,in principle inalienable,whilethe specificright to cultivatean individual plot is lost by desuetude ,... As long as a tribe of forest-fallow cultivators has abundantland at its disposal,a familywouldhave no particularinterestin returningto preciselythat plot which it cultivatedon an earlier occasion.Under theseconditionsa familywhich neededto shift to a new plot would finda suitableplot, or have it allocatedby the chiefof the tribe.... But the situationis apt to changewith increasing population,as good plots become somewhatscarce. Under such conditions,a familyis likelyto becomemore attached to the plots they have been cultivating on earlier occasions....

Hunter-gatherer

T e r r i t o r i a I r i gh ts
Emergence

t o

hunt

and
-

g a t he r
external market land grants

3~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ of agriculture

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o

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Indenturt,

Family Farm
communal tenure

.
________ _______ ________ ________ _____Plaantatio

Plantatlabor
Plantatlo

Manorial systemns
tonants. corvee labor self-cultivation of the home farm
'rigl
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4
Permanent cropping

I grater

to efol il"|o [*

to
greater rlghtJ

unrestricted right to sell

15
to overlords

Abolition

~~~~~~~slavir y

ol

Family Farm
owner-operated

Landlord Estate
entirely tenant-operated

Hacienda
ten nt plus owner-operated home farm

L
Plntatior

Contract Farming

Permanent

Family Farm

Landlord Estate
cropping ...
mamas.Isauve *eaamu-.p.rmd 11

Hacienda.
*
@waer.sparatsd

Wage
Plantation

croppingLndroorrr

. ._
Land reformTen1 Junker Estate

r*eht is s@el

*am.s3vI@Iei
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Land reform

lowner-operated\

7_____________6_________

subsldlde

Contemporary Systems

Family Farm
*,.-prld13

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commercialfarm

Farming

Titilng

and Land RKegletrlom s e* Laud R1at1le Co aoollidmtis

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Eliminatlio

POLICY

of subslidie
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QUESTIONSFlagmemtltloead
Land Taxatlsn

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At this stage, whenthe attachment of individual famillesto Individual plots becomes more permanent,the customof pledgingland is also likelyto emerge.If a family does not need to use a givenplot for a certainperiod It maypledgeit to another family .... subjectto the condit:onthat the land must be returned, uponrequest....

Thiscustomo; pledging.... must be distinguished sharplyfrom the sale of land

where the former occupierof the land losesall rightsin it. Thus, the attachme At of individual familiesto particularplots becomesmore and more important.... As moreand more land is subjectto specificcultivation rights, little land will be available for redistribution by the chief.... As long as the generalright of cultivation has not lost all its importance a sharp social distinctionexistsin rural communities betweencultivator familieson one hand and familieswithoutcultivation rightson the other, the lattergroup consisting of strangers,whetherthey be slavesor free... even those strangers,who are not slavesin a legal sense, are nevertheloss left with no other choicethan to do menialwork for chiefsor for ordinarymembersof the dominating tribe.... Under both long- and short-fallow systemsthe land lyingfallowat any giventime is at the free disposalfor grazingby domesticanimalsbelonging to familieswith cultivation rights....h. Ile cultivaors' communal rightsto use fallowland for grazing will usuallysurvivelong after the generalright to clear new forest land has dsappeared.... (Boserup1965, pp 79-80 Boserup'sdiscussionmakesclear that propertyrights in land are not simpleand are arely unresticted. As land becomesmore scarce,generaland Inheritable cultivation and grazing rights are complemented by rightsto resume cultivating specificplots afterfillow (srrow 2), to inheritspecificplots rather than just generalcultivaion rights, to pledgeor rent out the plots, to use them as coilateralin informalcredittransactions,and to sell them withinthe community (arow 3). When the right to sell Includessales to membersoutsidetta community (arrow 4), the last vestiges of general cultivation rightsare lost amdprivatepropertyrightsare complete.Generalrightssurvive only as grazingand collectionrights on communal grazingareasand forests,whc-e soils are usually unsuitale for crop or intensivepastureproduction.

Even wherecommunal land rightsand management systemsprevail, as in indigenous communities of the Americas,or tribal communities in Asia and Africa, familieshave strong specific laud rights. These rightsp;ovidesubstantial'ownership' securityas long as the plots are farmedby individual familyunits (Noronha1985;Downsand Reyna 1988).Land rental and sales usually occur
withilnthe community, especially among close kin.

Whilethe internalrules and structuresof these systemsexhibita bewildering variety, all communal systemshave one thing in common:Salesto outsidersare either forbiddenor subjectto approvalby the wholecommunity. The right to sell is oftenproscribedby laws that assignultimateownershipto the state or that regulatethe land tenure of tribal or indigenous communities. Colonialpowersoften legislated a uniformsystemof communal tenure to be appliedto all land held by indigenous populations (althoughtribal societieshave oftencircumvented formalprohibition of land sales; Noronha 1985). Under communal tenure family-owned plots can be used only for pledgingin informalcredit markets and not as collateralin formal credit markets.

2. Extracting tribute and rent from peasants Historyhas few examplesof the uninterrupted transformation of generalcultivation rights to land into owner-operated familyfarms (alongarrows 1 to 4 in figure1). Nearly always, there has been an intervening period under a class of rulers who exacted tribute, taxes or rent from cultivatorfamilies(arrow 5). The landholdings of theseoverlords(referredto here, for expositional simplicity,as manortal estates, whatever the cultural or historic setting) were allocated temporarily or as permanent patrimonyor ownershipholding, alongwiththe right to tribute, taxes, or rent (in cash, kind, or corveelabor) from the peasantsresidingon the estate. Frequendy,peasants' freedomto movewas restrictedby bondageor by prior claimsto land by membersof the rulinggroup. The rights of the rulinggroup were acquiredand enforcedby violenceor the threat of violenceand
2 The rights took institutionalized in tradition, custom,and the law and order forces of the state.

2 For WestanEurope,North andIhomas(1971) inteprette rig to triute as theemergence of a contract between peasts nd maoril lords,withthe lordsprovding protecon andotherpublicgoodsi exchange for tribute. Ihis viewipore the asymmety in thepossesdon of the meansforviolence andjudicial

pow. 10

numerousforms and left historicallegaciesin the distribution of land once land rightsbecamefully private. Again,Boserup(1965)says it best: Abovethe group of familieswith cultivation rights is usuallyfound an upper class of tribal chiefsor feudalland who receivetributefrom the cultivators.... The emergence of a kind of nobilityor aristocracyoftenseemsto followthe introduction of shortfellowcultivation with animaldraft power.... Usuallythe positionof a cultivatorwith regard to his rights in land does not changebecausea feudalgovernment imposes itself and leviestaxes and labor services.The cultivatorfamiliescontinueto have their hereditarycultivation rights, bothgeneraland specific,and redistribution of land by village chiefsmay continuewithoutinterference from the feudal landlords.Nor does land becomealienableby sale; grantsof land by overlordsto membersof the nobility and others are simplygrantsof the right to levy taxes, and do not interferewith the hereditarycultivation rights of the peasants.In other words, the beneficiaries of such grants do not becomeownersof the land in a modemsense.... (pp. 82-84) An analytical structure for the evolutionof agrarian relations For an analysisof the evolutionof agrarianrelationsand the associatedland ownershipdistribution,severalpointsare key. The first is that favorableagricultural conditions generatethe potentialfor rent-seeking rent or surplus and providean incentivefor groups with politicaland militarypower to try to capturethe rents or surpluses.The secondis that under simple technologythere are no economies of scale in farmingand that independent familyfarms are economically the most efficientmodeof productionexceptfor a very limitedset of plantationcrops, (see section4). Comparedto large farms based on hired or tenantlabor, owner-operated familyfarms save on supervisioncosts of labor or eliminatethe inefficiencies and supervision cost constraints associatedwith tenancy. Therefore, wherepopulation density is very low, peasantswill establishtheir own farms in the bush and therebyescapepayingtribute, taxesor rent to the overlord.Extractingtribute under these conditionsrequirescoercion. Or the utilityof the free peasantmust be sufficiently reducedso that they will offer themselves voluntarily as workersor tenantsto holdersof large tracts of land at wages, rents or crop shares that providethe samelevel of utility as would independent self-

11

3 Coercionis no longer necessary.Utilitycan be reducedby changingthe free peasants cultivation.

can also try to increase the supplyof labor or tenantsto accessto high qualityland. Large landowners taxationof owners and to intervenethroughdifferential governments their holdingsby Influencing on marketaccessthat drive downprnfitabillty workersin large and smallholdings,or by limitations price of labor. Such economicdistortions peasantsand thus reducethe reservation for independent increasethe rent that goes to large-scalefarmersat a cost to the economyof lower productive efficiency. Whenpeasantscan freelyestablishtheir own farms, It becomesvery difficultto there are With simpletechnology, operatelarge farms with hired labor under a singlemanagement. usuallyno technicaleconomiesof scale (section4). Lumpyinputssuch as draft animalsprovidefor decliningeconomiesof scale at very small farm sizes. For larger farms the samedraft-animaland has to be repeatedseveraltimes over, leadingto constanttechnicalrets. driver combination over large farm a cost advantage Disincentives associatedwith hired labor give the family-operated to work than do farms: for familymembers,there are no hiring costs, they have greater incentives learningcosts are hired wage labor becausethey receivea share of profits, and third, site-specific lower. families(sharetenancy)or granting Rentingout entire small farms to sharecropper to circumventmanyof usufructuary rights to peasantsin exchangefor tributeallowslarge landowners of the tenant fmily's faming and take advantage the disincentiveeffectsinherentin large wage-based labor. Share tenancyhas some incentivecosts of its own,however,(section6) and even under fixedand moralhazard. rent tenancythere are problemsof supervision can organizetheir Once a labor supplybecomesavailable,large landowners operationseither as landlordesmas, with the entire estate culivated by tenantedpeasants,or as portionsof the haciendafor their own subsistenceas tenantsor hacendas, with workers cultivating holders of usufructuaryrightsand providingunpaidcornie or labor servicesto cultivatethe homefarm of the owner (see glossary).Sinceshare teonatsdo not receive their full marginalproduct, landlord estes based on a lump-sumrent paymentwouldbe the most efficientform of operation, followedby landlordestatesbased on share rents. The haciendawouldbe less efficientsince labor

as pat of thebarin. 3 Taking intoacount anyrisk tduction t lanoner maybe ableto provide 12

of the home farm entailslabor to invest, and landowners'cultivation tenantshave few incentives now. cost. Thesepointsare more fully elaborated supervision featureof Coercion: As Boserup(1965)pointsout, 'Bonded labor is a characteristic land suitablefor with hierarchicstructure,but surroundedby so muchuncontrolled communities to preventthe membersof the lower class by long fallowmethodsthat it is impossible cultivation unlessthey are madepersonallyunfree' (p.73).Four from findingalternativemeansof subsistence labor wayshave traditionallybeen used to tie labor to large farms: slavery,serfdom,indentured contracts,and debt peonage. Meillassoux1981,showsthat for merchantslavery in whichthe slaveholders purchase, rather than captureslaves,they mustproducefor the marketto financethe slaves.' In areas of hunters and gatherersand with ties to externalmarkets,such as in the with sparse populations United States' Southeast,the East Coastof Brazil, andthe SouthAfricanCape, largefarms had to were too few to providea steady importslavesas workers(arrow 6) The nativehunter-gatherers labor reservoirs labor supply,or simplymovedaway.Large farms in areaswith access to abundant (Sri Lankan)and Assamesetea such as the sugar islandsof the Caribbeanand Mauritius,Ceylonesfe labor insteadof plantations,Malaysia,Sumatra,and SouthAfricawere able to rely on indentured to preventthem for the period of indentureat slaves (arrow 7). lhe workershad to be indentured plots of their own or goinginto mining.Laws and policeforceswere used to least from establishing labor contract and to ensurethe recaptureand returnof escapedslaves.The enforce indentured laborfrOmdistantlands, and the for recruitingindentured capitalcost of slaves, the cashrequirements

Mesaillouxalso showsthat these systemsof merchantslaery were dependenton systems of aistocratic skvery which engagedin the reproductionof the slavepopulationthrough peasantpopulations.Domar raids and warfare on widelydispersedsubsistence-oriented (1970) relates ownership rights in people - slavery and serfdom - to land abundance, which makesextrating residual land rents impossible.What he did not distinguishis that slavery, the purchaseof the labor force, requireshigh levelsof capital, which can be financedonly if there is a market, while serfdominvolve extractingtribute withouta purchasetransaction,
4

and so no market is needed.

5

For a discussionof the transitionfrom slaveryto serfdom, see Mesailloux1991.

13

absenceof cash marketsfor food in fact impliedthat these systemscouldbe used only for crops that bad an export market.' more denselypopulatedregionswith Serfdomor bendagecouldbe used in somewhat (arrow 5).7 and productionprimarilyfor only local consumption a settledpeasantpopulation Peasantswouldhave had to moveto more marginallands to escapebondage. Slavescouldnot be importedbecausethere were no export earningswith whichto purchasethem. Overlordsobtainedthe to the land and to extract tributeor labor services.This populations right to tie subsistence-oriented pattern arose during feudalperiodsin WesternEurope,China, and Japan, and pre- and post columbianAmerica,and survivedin EasternEuropeuntil the late nineteenthcentury (Blum1977). Debt peonageor bondedlabor, anotherform of coercion,survivedin manyareas densities.Wheremanorialestateshad to competewith minesfor labor even under high population and thereforefaced acute labor shortage,as in Guatemalaand Mexicoin the nineteenthcenturyor in South Africa in the twentiethcentury,vagrancylaws kept a pool of potentialworkersin prison for a variety of petty offenses(seetable 1). In SouthAfrica farmerscouldinvest in prisons in exchangefor rights to prison labor; these rights couldeven be traded.

Economicdistortions Wherecoercionwas no longerpossible,or sufficient,influentialgroupswere able to to interveneto createeconomicdistortionsthat would generatea labor supplyfor get governments density washigh enoughfor long falow agricultureto replacehunting their farms. Once population farmingoperationsin areas withoutslavery and and gathering,peasantswould establishindependent

andArgentina) Brazil, EsternUS,Southern North (Canada, temperatezrn of the AMericas zon Europeunil the to temperate ecwapdslavey becausetheir producscouldnot be exportdcompetitively at a timewhendaveryhadgone outof dyle. Thetropicaland itmshp andthe railroad advent of the s in Europe mankets. facd no competition cotton,andtobacco sbtopical cropssugar,
6
nTo

Mesailloux (1991) also shows that these systems of merchan slavery were dependent on slaves for systems of aristocratic slaveiy which engaged in the reproduction of the slave
7

peasant populbaonthrough raids and warfire on widelydispersedsubsistence-onented populapions.

14

bondage.With identicaltechnology and a competitive output market, cultivation of the home farm with wage labor wouldnot be competitive with the free familyfarm becauseof incentive disadvantages and labor supervisioncosts. To get free peasantsto moveto the manorialestaterequiredloweringexpectedutility or profits in the free peasantsectorin order to reducepeasants'reservationutility- expectedutility from familyfarming, includingthe risk attributesof the corresponding incomestream- or shift their labor supplycurveto the right. This was achievedthroughfour mechanisms: Reducingthe land availableforpeasant cultivation by allocatingrights to "unoccupied'lands so that they went to membersof the ruling class only and thus confining free peasantcultivation to infertileor remoteareas with poor infrastructure and marketaccess. (rable 1 lists a varietyof casesfrom all continentsin whichaccess to high qualityland was restricted).Farm profitsor utilityon free peasantlands were thus reducedby the higher labor requirements for producinga unit of outputon poor land, by increasedtransportand marketingcosts, and by increasedprices for consumergoods importedto the region. * ItImposing d5iferendoJ taxationby requiringfree peasantsto pay tribute, hut, head or poil taxes (i cash, kind, or labor services)whileoftenexempting workersor tenats in manorialestatesor taxing them at muchlower rates. Suchsystemswere used widelyin WesternEuropeduring the feudalperiod, in ancientJapan, China, India and the OttomanEmpire, and by all colonialpowers (table 1). Tributesystemsin Eastern Europe and Japan survivedinto the secondhalf of the nineteenth century.As long as free peasantscan pay tributeor taxes in kind or cash and have equalaccessto output markets, taxationalonemay be insufficient to bring forth a supplyof workersor tenants.They were thereforeoftencomplemented by output marketinventicas. * RestrIcting marketaccess, by commonly settingup cooperative or monopoly marketingschemesthat buy only from the farms of the rulers. Theprazo systemin Mozambique combinedrightsto labor and tribute from peasantswith monopolies on inputsand outputs. In Kenyathe productionof coffeeby Africanswas prohibited

15

Table 1: Intervention to Establish and Suort LargIeFarms.

COUNTRY LAND MARPT

VVENTIONS

TAXS AND

TBRVENTIONSIN LABOR AND

IOUTUIr MA1S
ASLA
Idia (Norah) Chin. (South) LAnd rans fin lot entuy Haced system; 4th cne WC Corece labor, from 2nd contr LImitationson pea nmobility;caSO Tax eneption for swves; ca 300 Gentry exemptionfrom es & labor srvices; ea
1400

Jap Io and Sumata

Ecludve lnd rights to developed wsteland; 723

Ad grant to companies; 1870

Tribute exemptionfor cleared and temple land; 700 Indentued labor. 19th cenuy Culivation System; 19th century Encomienda

iwpimnes

Lan grSts to mostic

ler; 16th ce_y

Rimioato
Tax exemptionfor haciendaworen ; 16thcenatry Sdri Lhan Land appropdration;1840 aunation tax eonyt, 1818 Indenture labor 19th century Monopoes on millig and alcobol Retorictionson hbor mobility, 1530 Land form legisations; 17S0-180S Resictions on pe mobility: - Exit fees; 1400/50 - Pobidden yea; 1588 - Bnerfwnt- 1597 - Tndabiliy of secr 1661 Hoan farm w pt from taxata1580 Debtpompge; 1597 Monopoly on commee; until 1830 16th ceouy Eionends; 16th century Labor ervic (Wt); 17th centy bIport dutis on beef; 1890 Subidies to mechanizstiom 19S50i6 Vesnay lws; 182S Exenption from public an miitary smo
___ ___ ___ ___ __ ___ __ _lu__

EUROPE.
Pnusa Land rams; from 13th conuy

Ruwsa

lAnd grAs; from 14thcentury Service tem ; IS65

S. AMERICA:
Chai Land grant (ereda de m);

El Salvdor

Gra

dli
uah mala te

of public land; 18S7 of commu nd; 1882 of dln 16t centr

for

_lbandm

endthi

workers; 1647

Retlmen

Cal trute; 1540 Manmiento; ea 1600 Debtpeonago; 1877 1 i ; 1490 Trt exemption for hacienda worke Dobt peongp; 1790 Rctu of debtorn to haciendas; 1843 Vagncy 1877 17thc.

Mexico

propratio

t of lodis; of com

IS40
_nal luand;

lws

Viceryai hay

of

Lad gSant; 1540 Resettlement of Inian (consr_gacla); 1570

rift ad expropriation of Inian lad; 17dhceumry

Encomianda; 1530 Mhu: Exemption for hacienda wokear, ISS0

Slavery of Africa; 1580

16

AICAs A a

MMng; co 1840 Landgru under ettlmentprogms; 1871

'Sealers' law' 1873

Tax oxemption fo worker on Eluopen fm; Creditproviskin fow vLP -|"t settlerc Slavery; until 1880 Vaganq law; 1875 Corve.hbor, from 16thcentwy Corv. exemption for farm-workers; 1840. Lan tax oxemption for lage badlords; 1856

1849

Atoag Egypt(Ottoma)

ndM concesIonsto uropeans; 1838,1865 Landgrns; 1840

Credit andmrketing ubsidie, 1920 ad 1930.

K|uR Landconwesions to Europea; ca 1900 No African landpurchausoutside rcsot; 1926 Hut ndpoll tues; from 190S labor Pase; 1908 Squatter laws;1918,1926and 1939 Restritionson Africans' maket acces; from 1930: - Dualpricesydemfor maize - Quanine and for" dstackig for livestock - Monopoly markeoing acato - Prohibition of Africanexportcropcivation
Subsidiesto mechanizaton; 1940c

Sokotho Caliphate Malawi Mozambique

Ln gmuns to settler; 1804 Lan allotmen to Europea; 1894 Comprhendverightsto lse csorry underprmo; 19th

Slavery; 19thcentury Tax eduction fr fam-wore; Labortribute;1880 Vagnucy law; 1899 Aboiion of Africantrade;1892 ca 1910

Forced cultivation; 1930

Sou Africa Nativerserve; 19thceonury Pasud-commu tenurein eaves 1894 NativeLads Ac; 1912 - Demarcof r - E_imion of tenancy - Prohibition of Africanlnd purcase outside Lan gat to setles, 1890 Slavery and indentured hbor, 19thcenury Resrooe on Africn mnobiii; 1911,1951 Mono" maren, from 1930 Prion labor.ea 1950 Dirct and indirct subsid; 20thcenuy

Tanayia

.___ _ _
Zimbao Roeerve; 1896and 1931

__ __ _ _ __

Huttax and corve requirements; 1896 Comnpulsory cottonproduction; 1902 Vagrancy lw (workcard); 20thcenury Exchlsonof Africans fromcedit; 1931 Markei coopsto deprs Africn price; Pdb andhut ta; 1896 Dscrimatinm again tnan_ , 1909 M_oy mar et boards,fiom 1924 - Dua pricesystm in maime; - Faced detockin in livestock;1939

1940

outrightuntil the 1950s.Europeanmonopolies on sales of tobaccoin Zimbabwe and Malawiwere directlytransferred to large farms after the countriesgained independence.

17

credit)jo the (roads,extension, goodsandservices agrlcidturalpublic Coipning thesefarms directlywas anothermeansof incaeasing or subsidizing of the ruders fawms
relativeto peasantfarms.' their profitability by coerciveinterventions were supplemented the four types of distortions Sometimes in the labor market - vagrancylaws, debt peonage,and rural slaveryare examples- to make it easier to retain workersor tenantson manorialestates. involvedlegal or customaryrules backedby the state, Sincethese four mechanisms used to of distortions they requireda coalitionbetweenthe overlordsand the state. The combinations density have been remarkablysimilar establishmanorialestatesunder conditionsof low population across continentsand over time (table 1). The earliestrecordedincidencewe foundwas in the Arthasastrain the fourthcenturyB.C. Once membersof the rulinggroup beganto establishviable in more than aricultural productiongeting enoughworkersfor their estatesrequiredinterventions on land use with differential one market. The most commonpatternwas to combinerestrictions - Ottomans,the taxaion. Groups with widelydifferentcultures,religions,and ethnicbackgrounds Hausa and Fulani in Africa, the Fujiwarain Japan, and all Europeancolonialpowers - imposedsuch whenfaced with similar material systemson peopleof the same or differentethnicbackgrounds conditions. Materialconditionsof productionrather than cultureseem to have led to the emergence of the distortions. Production relations on the manorialestate On both landlordestatesand haciendas,corvee,all of part of the land is cultivatedby rights. In the hacienda,the unpaid laborservicesof peasantsunder tenancycontractsor usufructuary peasantswho hold usufruct rightsto some plots on the estate is used to cultivatethe homefarm of the owner. Corvee may includethe servicesof their draft animalsand plows. The labor servicesof tenantsconstituteall or a part of their rental paymentsfor the use of the land. Peasantsmay be free peasantsreceive a wagepaymentin to leave the manorialestate or may be boundto it. Sometimes

maizethroughthe MasterFarmr Ptogrammi In Zimbabwe,Aficans had beenencouragedto cultivate to growntobaccoand cotton.Whenthose farmerfoundit moreprofitable h lat 1920swhenEuropean FarmerProgram were introducedand the Master price systems matketing and dual monopoly m coliapsed

theNatives to "teach thattheyhadneverintended declaring publicly officials withresponsible wasabandoned,

withEuropeanproducers(Phimister1988:235). to grw maiz in compedtion 18

by additionas part paymentfor their labor. Often, the residentlabor force is complemented seasonallyhired wage workers. and in their The extremevariationin the namesand detailsof these arrangements analysisin a singletheoretical over time has long stood in the wayof comparative local evolution framework.Yet commonelementsseemclear. Landlordestateswere prevalentin China,Korea,Japan, EasternIndia, Pakistan,Iran, it was easy for landlordsto restrictpeasants' Egypt and Ethiopia.In manycolonialenvironments, Haciendas over outputmark-ets. and maintaincontrolover land and labor and sometimes alternatives form of manorialestatesin Algeria,Egypt, Kenya, SouthAfrica, emergedas the predominant Zimbabwe,Bolivia,Chile, Honduras,Mexico,Nicaragua,Peru, and other countriesin Latin in Prussiaand other parts of EasternEurope. America,in the Philippines, The homefarm of the landlordoftenvastlyexceededthe area actuallycultivated.A for possibitities population's was to restrictthe indigenous majorpurposeof the huge landholdings cultivation,and muchof the land remainedunder forest or fallowor was devotedto independent extensivelivestockgrazing. At the heightof the feudalperiod in WesternEuropebetweenone-quarter by the owner in the home farm. On and one-halfof the total area on manorialestateswas cultivated Latin Americanand Africanhaciendas,that share was initiallya muchlower, one-tenth(Palmer1979; Chevalier1963). and limited Many historicalaccountshave notedthe lack of competitiveness of homefarms relativeto landlordestatesin whichall land is profitabilityof large-scalecultivation studies. Records by a rangeof quantitative Is also confirmed rented out. Tbat relativedisadvantage hacienda for the eighteenthand early nineteenthcenturiesshow that in all of the cases investigated ownersin Mexicowouldhave been better off by rentingout all of their land at rents actuallypaid by their homefarms (Brading1978). Manyoverlordssurvived tenantsrather than cultivating producersonly becauseof their accessto capital from independent againstcompetition economically marketsand large-scalestorageof maizewhich couldbe sold at high prices in poor years (Florescano 1969).The sameappliesto manyChileanand Peruvianhaciendasin the sixteenthand seventeenth belowthe marketrate at centurieswhichyieldeda return on capitalof about4.5 percent, considerably whichthe overlordsborrowedfundsto keep up their livingstandards.They were ableto repay of their land (Moerner currencyand the appreciation mortgagesonly becauseof a rapidlydevaluing 19

1973:204).Labor productivityand total productionon the patrons' plots were abouthalf that on tenants' plots in Peru and one quarterin Ecuador (Pearse 1975:91). What explainsthe total amountof tribute, surplus,or rent that couldbe extracted from the peasantson the manorialestate?The predominant explanation for Europeanestateswas a demographic-economic model based on Malthusand Ricardo(see, for example,Postan 1973;Le Roy Ladurie 1966, and 1985;North and Thomas1971;Brenner1985;Holton 1977)that relatestribute burdensto relativescarcitiesof land and labor. Beforeruling groupscontrolledmost of the land or were able to coerce labor, attractingor retainingpeasantsto manorialestatesin areasof low population density requiredthat peasants'utility on the manorialestate exceededtheir reservation utility for subsistence farmingin the bush or in areasfrom whichthey had to be inducedto emigrate. In Europe east of the river Elbe such terms usuallyincludeda grant of hereditaryusufructrights. Initially,most corveelabor was devotedto the construction and maintenance of infrastructure. As long as population densitieswere low, corveerequirements had to be regulated and enforcedby the state. But as risingpopulation densitiesand increasedland scarcityreduced peasantmobility,it becamepossibleto increasethe amountof tribute extractedand to increasingly rnsform that tribute into obligations to workon the landlord'shome farm Labor requirements,of two to three days a week in feudalEurope, nineteenthcenturyRussia, Kenyain 1918, and Central and SouthAmerica,began to rise with growingland scarcity.In Kenya,corvderequirements for squattersand their familieshad risen to five days a week by the end of the colonialperiod (Resident Labor Ordinanceof Kenya, 1939).
This simpledemographic-economic model falls to explain,however,why European

regions reactedso differently to the plague-induced declinesin populationin the fourteenthcentury. The associateddrop in tribute contrbuted to the erosionof serfdom in WesternEurope, but led to the reimposition of serfdom in EasternEurope. In the debateover the demiseof feudalismin Europe, Bremner (1976, 1982)clearly established that economicfactors such as population density and market access alone are insufficient to determinethe incomedistribution betweenpeasantsand lords in the manorialestate. At best, they determinenot the actualamountof tributeor surplusthat couldbe extractedfrom peasantsbut rather the maximum potentialamount The lords' successin extracting tribute dependedon their politicalpower to claimthe land, monopolize markets, and controlthe movementof peasantsrelativeto the power of peasantsto resist these efforts.

20

Barganing between peasants and lords and the distribution of Income

game, the on the outcomeof a bargaining The amountof rent extractedthus depended politicalconfli^t,or the class struggleover the definitionof 'property rights" in the widestsense. of the landlordsrelativeto that of the peasantsand the successof That meansthat the cohesiveness the alliancesthey couldforge - with the King, the bureaucrac),otherproductionsectors, the fnancial of surplus sector, and externalinterests- are centralto an analysisof changein the instruments extractionto landedclasses. betweenpeasantsand over the terms of incomedistribution In the bargaining landlordson the manorialestate,two sets of issuesmust be dealt with. One is to definethe admissible the instruments including set of propertyrights and of coerciveor voluntaryexchangerelationships, ITis problemincludesthe abilityof overlordsto impose used to enforcesuch relationships. restrictionson peasantmobilityand outputmarkets,the broad terms of legitimateleases(inheritable usufruct,long-termleases, short-termrental),the formsof rental paymentavailable(cash,kind, labor, fixedrent, crop share)and the sanctions(eviction,physicalpunishment,fines)or instruments that ca be used to enforcesuch changes.The other is to determineoptimalmix and level of use of surplus extraction,takingthe availableoptionsas given. Although eachintrument for maximizing set of this questionis more amenableto economicanalysisthan is the problemof the admissible withoutcoercion(see, instuments, there has been little formalmodelingof it, even for environments for example,Carter and Kalfayan1990;Carter and Zimmerman1992;and Sadoulet1992).' processbetweenlandlordand This secondproblemcouldbe set up as a bargaining his incomeor utility subjectto the tenant's reservation potentialtenants. The landlordwho maximizes utility consaint, determinesthe termsof the tenancy,the size of the tenant's plot, and the size of his he can set the overallrent burdenof the own home farm accordingto the followingconsiderations: in cash or kind, and crop shares, tenat. He can partitionthe rent into corvde,fixedrent payments

(1992)providea of tied laborcontracts.Carterand Zimmerman capitalconstaint can rsaultin the emergence of charateristics the salient of of a number the emergence dynamicextensionof thismodeland demonsbta the explains (X992) Sadoulet problems. dualagrian societia aSa conquace of credit and laborsipervion emergec of laborsorviceteancy as a deviceadoptedby the ladlord in order to enfore an optimallevel of agpinstdeft by te tenantin the caseof crop failure. Covaianceof yieldsbetweenthe landlord's nsurance hnornfatm and tenants'plots is igored howevr. But in yar of crop failurethe tenants'laborhas no value on costs. Sadoulet'sexplanation ether, and forcinghim to provideit only leadsto extra supervision tIe hom faram hereo fails. 21

(1990)showthat thecombtion of a laborsupevion constrint and a wordng 9 Cintr and Kalfayam

each havingits own incentiveproblems.He can choosethe amununt of land allocatedto home farm cultivation,knowingthat incentives are requiredto bring for,"% effortand that supervisionis costly. He can choosethe size of the plot allocatedto the tenants, knowling that familyfarms providehigh incentivesto producebut may lead tenantsto concentrate on dt'wrownplot and not supplysufficient effortfor homefarm cultivation. With peasantsfree to leave,the major constraintfaced by the landlordis that he cannotdrive the utility receivedby his tenantsbelowtheir reservation utility- the utilitythey could receive workingin the free peasantsectoroutsidethe manorialestate or in an urban labor market. ITe tenant, for his part, can vary the labor efforton his own farm or leave for frontierareas, indigenous reserves,or urban labor markets.So even withoutcoercionor the abilityto affectthe reservationutility, the landlordseemsto have an abundance of instruments for drivingthe tenant downto his reservation utility.Withoutfurtherrestrictionson the bargaining problem, its solution may be indeterminate. Constraints on the bargaining problemimposedby the state - restrictions on peasant mobility,on the size of parcelto be allocatedto peasantsin inheritableusufruct,or on the tribute, rent and corvde requirements, for example- can simplifythe structureof the bargaining problemfor specifichistoricalsettings.Butthese outsideregulations did change,albeitslowly,in responseto such forcesas population densitiesand politicalconflict,so,they can not truly be regardedas exogenous. Thus the complexity of the problemremains. Rent seeking, coaUtions and conflict The analyticalproblembecomeseven more complexif it incorporatesrent seekingor surplus extractionthrougheffortsto changethe set of instruments available to landlords.A coalition or class of landlordscan try to inducethe stateto manipulate the reservation utility of peasantsand may succeedif peasantsor workersare poorlyorganizedto resist the change.We have not found any models addressingthese choicesor game theoryproblemsformally,but the literatureis rich in discussionsof changesin the degreeof coerciveness of the systemsand of changesin other instruments.North and Thomas(1971), for example,in an informallystatedbargainingmodel, analyzethd choicebetweentribute in cash or kind and corveelabor, suggesting that corveewas preferredover tribute in kind whereoutputmarketswere limited,and the relativeprices of goods

22

were highlyvariable.There are many other examples,however,of frontiersocietieswithoutexternal marketsin whichtributewas collectedin kind. Whilethe bargaining problemhas receivedlittle formalanalysis,manorialsystems have sometimes been interpretedas the outcomeof an efficiency-enhancing contractbetweenpeasants and landlords:the landlordsprovideprotectionand otherpublic goods(whichare producedwith economies of scale and requiresome specialization) in exchangefor tribute or rent (Northand Thomas1971, for example).This is a plausibleinterpretation for land-abundant settings,where tributerates or labor rents have to be set low enoughto attract immigrants.However,there are two major problemswith this view. First, it ignoresthe asymmetry betweencontracting partiesin accessto weapons, laws, and public investment budgets.The systematic use of these instruments throughouthistoryhas depressedthe utilityof peasantsand workersto far belowthe reservation utilitythat wouldobtain in a systemwithoutsuch symmetricaccess.Moreover,there is littledoubtthat substantial deadweight lossesand dynamicinefficiencies have been associated with taxes and tribute, with inequalities in factorratios betweenfarmingsectors, and with restrictions on accessto credit and output markets. Second,the contractview ignoresthe likelycompetition in rent seekingbetween landlords,whichwouldadd to the deadweight loss associatedwith restrictions.Competitive rent seeking,the literatureshows,is likelyto result in the dissipation of the rent into such rent-seeking costsas competitive armies, arsenals,and fortiScations, whichprovideno consumption value. Brenner(1985)arguesthat at the heightof the feudalperiod, rents were completely dissipatedinto the costs of competingin the system. Periodicconflictsover the right to extractrent have caused destructionand declinein manyflourishing kingdomsand empires,so the efficiency characteristics of the contractualsystemare only third or fourth best. Conclusion The major issuein land relations,then, is the evolution of the relationship between peasantsand landlordsover time. The best developedliteraturein this area relatesto the demiseof the manorialestate, corv6e,and bondageand the emergenceof capitalismin Europe. Dobb (1976) 23

interpretsthe emergence of capitalistfarmingand the loss of rights to tributeas the consequence of increasedpopulation densityalone, whileSweeney(1976)emphasizes the role of increasedaccessto markets. Brenner(1985)showsthat these explanations alone are inadequate,arguingthe need to introducethe cohesiveness of the two groups and the strengthof the coalitionsthey can form witk lings or urban groups.Holton(1977)also discussestheseissues, as well as broader non-economic theories).In particular,Brennerstressesthe importanceof the cohesiveness of the peasantcommunity in resistingattemptsby the lords to increasethe instruments available to them or the intensityof their use.

3. Success and failurein reform

How does the manorialestate disappear?AgainBoserup(1965)explainssuccinctly: "Ibe processby whichthe feudal landlordtenure [the manorialestate]is abandonedmay take differentforms: sometimes the positionof the feudal landlordsin relationto the cultivatorsis weakened;they lose their power over all or most of the peasantsand they end up as privateowners of their home farms only [figures1 and 2, arrows 8, 10, and 11]. In other cases, the feudal landlords succeedin their effortsto completely eliminatethe customaryrightsof the culdvators,and they end up as privateowners of all the land over whichthey had feudalrights, whilst the cultivators have sunk to the statusof tenants-at-will. England,of course, is the classicalexampleof this last kind of development'pp 79-87. In transitionsof the first kind the peasantsend up with the land rent, while in those of the secondkind, the landlordsretain the rent. Since land reform involvesthe transferof land rents from a ruling class to tenantworkers, it is not surprisingthat most largescale land reformswere associatedwith revolts(Bolivia),revolution (Mexico,Chile, China, Cuba, El Salvador,Nicaragua, Russia)conquest(Japanand Taiwan),or the demiseof colonialrule (EasternIndia, Kenya, Mozambique, Vietnam,Zimbabwe).Attemptsat land reform withoutmassivepoliticalupheavalhave rarely succeededin transferringmuchof a country's

24

land' (Brazil,CostaRica, Honduras)or have done so very slowlybecauseof a lackof political commitment to providethe fundingto compensate owners(see section5). The outcomeof land reformshas been conditioned by three factors:whetherthe systemwas a landlordestate or a haciendasystem,whetherreformswas gradualistwith compensation or took place all at once, and whetherthe reform was undertakenin a marketor a socialisteconomy. We considerthe first two factors in the contextof the third, the type of economy.

Reform In market-based economies Rapidtransitionfrom landlordestatestofamiyfaims in a marketeconomy(figure2, arrow 7) has led to stable systemsof productions relations.The organization of productionremains the samefamilyfarm system.The only changeis that ownership is transferredfrom large landlordsto tenantswho already farm the land and have the skills and implements necessaryto cultivatetheir fields. Government involvement in the transitionhas oftenbeen substantial from a ceilingon the size of landholdings and the amountsto be paid for the land, to the establishment of financialobligations of beneficiaries. Many reforms,that followedthis pate providedstronger incentives for tenantownersto work and investin their farms and led to increasesin output and productivity. The

10 Horowitz (1993) models landreformas theoutcome of a Nashbargaining betwe to agents representing landed elites andthepoor. Eh partycaneither agreeto a reform propoulor iniiate 'revolt', defined as a lottery overthe thr outcomes *victory for te rich', 'victoryfor thepoor', and 'maintemane of the status quo'. Thepower-stucture which, in thecas of revolt,determines theprobabilities for eachof hse eventsi take to be exogenous andtime-invariant. his leadsto thedefiniton of a saferformplan as tho evolution of landholdins overtimewhich consitus a Nashequilibumin tie bargaing pm betwee lbdlord andpests which,at any t in tim, pvides eachpartywitha levelof utilityat leastequalto teir expetodudtliyi th caseof revolt Horwitz showsthatin thecas of riskneuality (i) th exdsta uniquesafereformjuanfor everyinitialdistrbution of lanoldings whih canentaileither rediutionu from the richto the io or accum atio of landby the rich;(ii) foranygiven powerst r, thoextent of land asfer is thogreatr of thehigherof theinitialimbalances in landholdings; (iii)except in pcial cases,the sfelandreformplanis a prolonged process consing of a sequence of individual reformevents ratherthana one-tmerdistnbution. Thisapproach is the firstformal modelin which thedepedenceof theequilibrum ladholdingpattemn on thepowerstuctureis clearly elaborated. Ihe determinants of power, suchas coalitions wi third groups andintemal cohesiveness are notmodeled, however, butfromthe modelit is clearthat changes in thepowerstrcture (suchas thechanges taing placein many partsof theworldafter1945) andthe insumets available to landlords to reduce peasants' reservation utilitywillhavemajorimplications for th stdbe landdistbutiao
J

25

resultingsystemshave had great stability.Sincethe end of WorldWar II, landlordestatesin Bolivia, large areasof China, EasternIndia, Ethiopia,Iran, Japan, Korea, and Taiwanhave been transferred to tenantsin the courseof successfulland reforms. Theoretically,the productivitygains associatedwith such reforms come aboutbecause work and investment incentives associatedwith increasedsecurityof tenure. These gains of improved landowners at near-market prices, if securityof tenure may be modestif tenantshad to compensate had alreadybeen high, if cash-rentcontractshad prevailed,or if the disincentive effectsassociated by Otsukaand Hayami(1988). Empiricalevidence with share-tenancy had been low as suggested showsthat the reform of landlordestatesled to considerable investment,adoptionof newtechnology and increasesin productivity(Callison1983;Koo 1968;King 1977;Dorner and Thiesenhusen1990) investments supportingthe transitionin ownership and that coststo the government of complementary structure,such as infrastructure, housing,training in management skills, were low becausethe structureof the smallholder productionsystemwas alreadyin place. By contrastwith the relativelysmoothtransitionfrom landlordestatesto familyfarms, reform of haciendasystemshas been very slow and difficult.The outcomehas frequentlybeen the Junker estateswith greatlyincreasedhomefarm cultivation emergenceof large owner-operated (arrow 10). Junker estatesproducea wide varietyof crops and livestockproductsusing a hierarchy are givena house and gardenplot, and external of supervisors,permanentworkerswho sometimes than plantations,which workershired on a seasonalor daily basis. Junkerestatesare less specialized of scale), and less produceand process a narrowrangeof crops (discussedin section4 on economies capital-intensive than large-scalecommercial farms. by tenantsfor Expansionof the landlord'shomefarm at the cost of land cultivated their own use wouldbe associatedwith lossesin efficiency. Therefore,rationallandowners wouldnot establishJunker estatesunless inducedto do so by such externalconstraintsas the threat of land such reforms, reform or restrictionson tenancydesignedto protect tenants'rights. Anticipating landowners often tried to reducetheir exposureto expropriation by evictingtenantswho usuallyare the beneficiaries of land reform. The lack of competitiveness of Junker estateswiththe more efficient smallholdersector made Junkerestatesan unstableform of productionrelationsand led to intensive lobbyingfor protectionand for subsidiesto introduceand expandmechanization. 26

into a subsidized capitalfor labor, the Junkerestate was transformed By substituting (arrow 11) that no longer depended on large amountsof large-scale mechanized commercialfarn of large commercial farms reducesthe potentialfor land reform since labor. Intensivemechanization there are not enoughfamilieswith farmingskills and implements availableon these capitalintensive farms to result in the establishment of efficientsmallfarms ableto rely on low-costfamilylabor. A similarresult can be achievedby converting haciendas or junker farms to livestockranches,which requiresvery little labor. The early rounds of land reform in Prussiagave freeholdpropertyrightsto hereditary tenants, requiringthemto servicesgive up one-halfto one-thirdof their hereditaryland to the Junkers r s compensation for the loss of their corveeservices.Fearingthat further land reform would include usufructrightsthe Junkersevictedmanyof the remaining tenantsat will or holdersof nonhereditary with hired labor. tenantsand revertedto cultivation in 1910, land reform In Latin America,ever sincethe MexicanRevolution have legallyenshrinedthe principlethat land belongsto the tiller and that indirect movements The BrazilianLand Law a causefor expropriation. of the land throughtenantsconstitutes exploitation of 1964puts a low ceilingon rental rates and crop shares and conveyspermanentusufructrights to tenantsafter a few years of tenancyby protectingthemfrom eviction.Similarprovisionsexist in in South on tenantcultivation some land laws in Asia (Chumaand associates1990).Restrictions Africahad differentroots - they were imposedto make tenancyless attractiveto Africanswho were neededas workersin the mines. Whateverthe motivation,these legal restrictionson tenancyinduced with hired labor, or owners of haciendasto evict their tenantsand to expandhome farm cultivation
1 shift to ranching,whichrequireslittle labor, or to adoptmechanization.'

That Junker estatesemergedonly in responseto pendingland reform and tenancy restrictionssupportsthe view that there are no technicaleconomies of scale in unmechanized

" deJanvry andSadoulet (1989) arguethatthethreat of landreformandtheirability to lobbyin coition

withtheurbansectorfor subsidies andprovision of publicgoods ledlargelandowners to mechanize andmake the transition fromhaciendas to largemechaizedcommercial farms in Colombia (1961-68), Ecuador (193657), Peru(1964-69), Venezuela (1959-70), andin Chile(after1972). InEcuador, twosepart stages canbe distinguished. Widespread eviction of tenants andtheformation of Junker estates, until1957wasfolowed by a periodof increased emphasis on thefamily-farm sectortogether withwidespread mechanization (1958-73). 27

agricultureand that the incentive problemsassociatedwith supervising hired or corvdelabor far exceedthe efficiency lossesassociatedwith long-termwhole-farm tenancycontracts.To compete successfully with familyfarms, Junker estateshad to find waysto reducetheir labor costs or to increasetheir revenues.Havinglost their rights to rent or labor servicesfrom tenantsor workers, landowners often soughtto securerents from the expandingurban and inJustrialsectorsthroughtrade barriersand subsidiesfor mechanizing production(de Janvry 1981).Trade barriers, by banningor reducingforeignagriculturalcompetition forced consumers to subsidizeJunker estatesor commercial farms. Examplesincludethe GermanZollvereinat the end of the nineteenthcentury(Gerschenkron 1965),tariffson beef importsin Chile in 1987(Kay 1992),and selectiveprice supportto products from large-scaleunits in Kenya,Zimbabwe,and SouthAfrica (Deiningerand Binswanger1993). Subsidiesfor mechanization led to the transformation of nearly all Junkerestates into mechanized commercialfarms(arrow 11). Huge sums were providedeither through direct mechanization subsidies,as in Kenya,or through cheapcredit, as in SouthAfrica, Zimbabwe,and virtuallyall of SouthAmerica,wherereal interestrates were even negative(Abercrombie 1972). Mechanization eliminatedthe need to rely on hired labor and resultedin widespread tenant evictionseven in countrieswith cheaplabor - hardly an optimaltransformation from a socialpoint of view. In some marketeconomies baciendaswere convertedto communalfamiyfarm systems (arrow 11). Communal tenure was adoptedfirst in Mexico'sejido systemand later, under land reforms in Bolivia, Zimbabwe,and elsewhere.Beneficiaries were grantedinheritable usufrucuary rights, but constraintson land sales and rentalsoften preventedusingthe land as cottateralfor credit. Attemptsto providealternativesourcesof credit tirough specialbansl or credit programsproved ineffective(eath 1992;WorldBank 15991). In Mexico,recent constitutional amendment legalizes land rental and sales within all ejidosand allowseach ejidoto removerestrictionon sales to outsiders, by a majorityvote, effectively convertingthe ejidatariosto owner-operated familyfarms. Reforms In sodalast economies Reformin socialisteconomies (figure2, arrows 10, 11, and 12) has followed differentpaths. Landlordestates in the former SovietUnion, Vietnam,and China were initially convertedintofamilyfarms (arrow 10), in muchthe same way as in marketeconomies.Ihe redistrnbuted farmlandswere later consolidated into single management units or collectives (arrow 28

13), In whichland is ownedand operatedjointly, under a singlemanagement. Familiesdo not operate their own plots as they do in systemsof communal ownership. In Algeria,Chile, East Germany,Mozambique, Nicaragua,and Peru, Junker estates or large commercialfannswere converteddirectlyinto statefarms (arrows 14 and 15). In most cases, workerscontinuedas employees under a singlemanagement, with no changein internal productionrelations.Over time, the organizational differences betweencollectives and state farms tendedto disappear. of scale in productionand related activities A desireto maintainpresumedeconomies (inputsupply,marketing) or to educatethe beneficiaries of reform duringa limitedtransitionalperiod (Chile),motivatedthe establishment of collectiveand state farms. But to achieveefficientproduction collecives have to deal withtwo incentives problems.One is to provideincentives to workers,a systemsdesignedto rewardlabor at problemaddressedby the adoptionof piece-rateremuneration of collectives were not ableto divert effort leastpartiallyon the basisof effort.Evenwhere members led to serious measuresby central management and of disciplinary to privateplots, lack of incentives of privateinto collectively ownedfarms in Cuba labor shortagesfollowingthe transformation (MacEwan1981)and Nicaragua(Enriquez1992). problemconcernsinvestment and savingsdecisions,whichare The other incentive madejointly by the colective. Bonin(1985)showsthat as long as equityfinancingis precludedand workerwill not make the representative memberscannotmarkettheir share in the cooperative, efficientinvestment decisions.Mitchell(1990)also examinesproblemsassociatedwiththe intertemporalallocation of consumption and showsthat the distributionof decision-making power betweenold (whowouldrather consume)and young(whoprefer to invest)determines the rate of growthfor a cooperative enterprise.Successfilcollectives tend to degenerateinto capitalistenterprises (or wage-labor-operated state farms)by successively substituting cheaperwage laborersfor more expensivemembers(Ben Ner 1984). McGregor(1977)providesa theoretical justification and empiricalexamplesof the tendencyof cooperative enterprisesto disinvestand to reducemembership in order to increasecurrentconsumption by members. Barhamand Childress(1992)showedthat Hondurancollectives decreasedtheir membership over time by aboutone fifth.Thus, the problems associated with prvision of workers' effortand intertemporal consumption proved at least as serious 29

in collectives as in haciendas(Boninand Putterman1986;Putterman1989). The poor performanceof agricultureunder a collectivemodeof productionis well documented and It is not surprisingthat the expectedincreasesin productionfrom economies of scale were not usually realized(see, for example, Colburn 1990for Nicaragua;Ghai, Kay, and Peek 1988for Cuba;Ghose 1985,Wuyts 1982, and Griffinand Hay 1985for Ethiopiaand Mozambique, Lin, 1990for China). Once giventhe chanceto
2 True do so, membersof collectivefarms oftenvotedto redistributeplots to family-szed farms.'

economies of scale wouldinduceeconomically rationalfarmersto establishcollectiveforms of production(Puttermanand Giorgio 1985). In the absenceof otherpossibilitiesof insurance, collectiveforms of productionwouldbe chosen,due to the implicitinsurancethey provide against noncovariate risks, even in the absenceof economies of scale (Carter 1987). However,cooperative productiondoes not insureagainstcovariaterisks. Empiricalevidenceindicatesthat socialties may be a less costlywayto insureagainstrisks that are not covariate(Walkerand Ryan 1990). In China, agricultural output in the first six years after decollectivization in 1978grew by 42 percent, with most of the growthattributable to the changein productionorganization (Lin 1992, Fan 1991, McMillanet al. 1989,Nolan 1988).Vietnamexperienced similarproductivitygains from breakingup large unmechanized collectivefarms into tiny familyunits (Pingaliand Xuan 1992). The small familyfarms in these denselypopulatedcountriesexpandedthe labor input and were able to reduce machineryand ferdlizeruse. Clearly,the incentiveadvantages of individual farming outweighed any efficiency losses due to the exremely small size and fragmentation of farms (Wenfangand Makeham1992). Under differentconditions,as in Algeriaand Peru (Melmed-Sanjak and Carter 1991), the privadzationand breakupof mechanized state farms or collectives has been less successful.

12

Ortega (1990) offersquantitative evidencefor the declineof the collectivesectordtoughout Latin

America. In Pemu, tho absenceof economies of scale led reformbendiciaes to effectively subdividereform colloctives by cncentaing efforton their privateplots and to ptess for legal subdivisions and individual land titles (Kay 1983;Horton 1972; McClntock 1981).Collctivas failedin Zimbabwe and were soonabandonedin favor of a smallholder-oriented strategy(Weiner1985).Similrly, colectivesfailed in the Dominicam Republic and were replacedby cooperatives, with individually ownedplots (Meyer1991).Landreformcooperatives in Panamaare highlyindebtedand use laborfar belowprofit-maximing lvels (ie 1987).Algerian productioncooperatives experienced lowpductivity membership dsertion, high ue of mnion, and cnderable underemployment of the workforce(Pfeiffer1985;Trtman 1985).The samepatten of declinig outputand transformation into a 'collectiveJunkerestate' has beenobservedin Mozambique (Wuyts1985). 30

Mechanization of these large farms had occurredand had reducedthe numberof workersor tenan before their collectivization. When thesecollectives were turnedover to their relativelyfew remaining workers,the resultingfamilyfarms were relativelylarge and unlike in China and Vietnamcouldant be operatedefficiently withoutadditional hired workersor high levelsof mechanization. But hiring additionalworkersdilutesthe incentives advantage of the familyfarm, and the farms had neitherthe accessto subsidized credit nor the large amountsof equityneededto financehired labor or the mechanization. To make reform workunder thesecapital-constrained conditionsand reap the efficiency benefitsof familyfarmingmayrequire includingmorebeneficiary familiesin the reform programthan those employedon the highlymechanized farms, by resettlinglandlessor near landless workersfrom outsidethe farms (Part III). The social cost of delayed reform: revolts and dvil wars Maintaining an agricultural structurebased on relativelyinefficient haciendasystems is cosdy. In addidonto the static efficiency losses" there are dynamicefficiency lossesassociated with the reducedprofitability of free peasantcultivation and the accompanying lack of incentives to investin physicaland humancapitalin the sector. Ihen there are the resourcecostsused in rentseekingto create and maintainthe distortions that supportthe large farms and contributeto rural povertyand inequality.In a competitive rent-seeking equilibrium these costsare equalto the rents. The distortionsreduceemployment in the sector, imposingan equitycost. Finally,the socialcosts of failingto reform have often includedpeasantuprisingsand civil war. ConsiderBrazil, wherethe social costsof continuedmassivedistortionsin favor of large farms have been substantial (Binswanger 1991)even withoutviolence.Between1950and 1980, agriculturaloutputgrew at a remarkable4.5 percenta year, land area expandedat 1.5 percenta year, but agriculturalemployment grew at only 0.7 percenta year. Over that period, the large-scalefarms evictedmost of their internaltenantsand workers,manyof whom migratedto urban slums or ended up as highly insecureseasonalworkerswithoutfarmingskills.An alternative growthpath based on

13 Quantitaiveestimates of thisefficiency los amr scare,but Loveman(1976)estimatethat Chilecould havesavedroughly $100milliona year in agricultual importsduring 1949-64 had the40 percet of land left Ucutiva byw l ndlords be cutimVated

31

for opportunities and self-employment smallerfamilyfarms couldhave providedrural employment share of the rapidlygrowingpopulation. many of thesepeopleand gainfullyabsorbeda substantial reducedthe In most cases,protractedand violentstruggleshave significantly performanceof the agriculturalsector and the economyas a whole. Whilepeasantshave rarely been many revolutionary movements the initialprotagonistsin radical class strugglesor revolutionary designated potential- sometimes took refuge in remote areasof limitedagricultural movements wherepeasantshave providedboth active and passive areas", "reserves", or "homelands""communal the importantrole of peasantdiscontent supportfor guerrillafighters.Many analystshave emphasized in incidentsof regional and nationalviolence(Moore 1966;Wolff1968;Huizer 1972;Migdal 1974; 1990;and Kriger 1991).The losses from such conflictsare, of Scopoland Scott 1976;Christodoulou can be gauged from the durationand course,difficultto measure,but some notionof their magnitude intensityof such strugglesas these cases show: * vagrancylaws, and forced labor to peasantsescapedfrom forcedcultivation, In Mozambique, rural areas, whichwere the main centersof supportfor the Frelimoguerrillas inaccessible in 1975. (Isaacman& Isaacman1983). Land reforms which from 1961until independence collectivefarms however,resultedin highly mechanized were initiatedafter independence, and did not addressthe problemsof the freeholdsector. Violencecontinuesto this day.
e

farmlands large scale evictionof some 85,000familiesfrom European-owned In Zimbabwe during 1945-51,led to a generalstrike amongAfricansin 1948and providedthe basis for AfricanNationalUnion)guerrillasin 1964, peasants' supportof ZANU (Zimbabwean (Mosley1983;Ranger 1985;Scarritt 1991and Kriger 1991). Guerrillafighterstook up the of land and state interferencewith production peasants' grievancesover unequaldistribution and used the TIbal Trust Areas as bases to attack Europeanfarms. Whilea substantial providedland to Africans,a numberof shortcomings settlementprogram after independence and Deininger1993). Policydistortions limitedthe successof this program(see Binswanger than small holder remainedin place despite evidencethat large farms are not more efficient to be a major politicalissue. farmers(Masters 1991)and land reform continues

32

in 1879by a law giving In Guatemala,communallandswere In effectexpropriated proprietorsthree monthsto registerland titles after whichthe land wouldbe declared to large coffeegrowers. land was then allocated abandoned.Most of the "abandoned" attemptsin 1951-54were reversedfollowinga militarycoup in 1954, when Redistribution virtuallyall the land whichhad been subjectto land reform was returnedto the old owner and from foreignerswere allocatedin parcelsaveragingmore than 3,000 farms expropriated hectares(Brockett1984).Sincethen, there has been a repeatedpatternof suppressinnand of the 1960sled to movements of the cooperative of resistance.Suppression radicalization formadonof the guerrillaarmyof the poor (EGP)in 1972, with Its mainbase in Indian in 1976with assassinations highlands.Peasantsrespondedto a waveof government-supported massacresof for peasantunion(CUC)in 1978. Government the formationof the committee protestingpeasantsfollowed(Davis1983).Almost40 years after the firstattemptat reform, signalthe cost of failure. peasantdemonstrations continuing

A decreeof 1856statedthat all land in El Salvadorwas similarlyappropriated. Smatlholder land not at least two-thirdsplantedwith coffeewouldbe consideredunderutilized communal land tenure was abolishedin 1888. Sporadic or idle, and wouldrevert to the state. Communal as the 1888"securitytax" on exportsto financerural revolts led to suchcountermeasures policeforces, a 1907ban on rural unions,and the creationof a NationalGuard in 1912 severe emergedas centers (McClintock1985).Areas whereland pressuteswere particularly of the revolt of 1932,duringwhichsome 10,000to 20,000peasantswere killed(Mason supportin reform gainedconsiderable 1986). Guerrillaspromisingland and other agricultural rural areas in particularfollowingtenantevictionsin the cottongrowinglowlandsduring availableto tenantsas 1961-70.Ihese evictionsled to a 77 percentdeclinein the houseplots to escalateuntil the numberof tenants droppedfrom 55,000to 17,000.Violencecontinued land reform in an officersengineereda coup and introduced 1979, when reform-minded guerrillaforces. Narrow attemptto preempt a shift in popularsupportto the FMLN-FDR of land reformsand more than a eligibilityrules sharplylimitedthe numberof beneficiaries decade of civil war ensued.'he peace accordof 1992mandatesadditionalland reform.

over land between land reform. Conflicts the perilsof incomplete Colombiaalso demonstrates from isolatedlocal attacksin the early tenantsand large-scalefarmersat the frontierescalated 33

1920sto more coordinatedtenantactionsby the late 1920s.Whilevariouskinds of reform legislationwere consideredduringthe 1930s,the law finallypassedin 1936vested rights in previouslypublic lands *ith large landlordsrather than the tenantscultivating the land (Le Grand 1982).A series of tenantevictionsfollowed,leadingto a quarter centuryof violence (1940-65)during whichguerrillasrecruitedsupportfrom peasantgroups. Land reform legislationin 1961and 1968regularizedpreviousland invasionsbut did nothingto improve the operationaldistribution of land holdingsand far fewer peasantsbenefittedfrom the reformsthan had previously been evicted(Zni.osc 1989).Peasantland invasions intensified duringthe early 1970s,leadingto the declaration of a state of emergencyafter 1974. Regional mobilizations, strikes, and blockadesflaredup again in 1984, indicated that the conflictis not yet resolved. Much of the rural supportfor the ShiningPath guerillasin Peru can be tracedto the exclusion of most of the highlandIndiansfrom agricultural bUnefits and the benefitsof agrarian reform of 1973whichbenefitted primarilythe relativelyfew workersin the coastalarea. As a result, more than half the departments in ae countryhave becomevirtuallyinaccessible to governmentforces (McClintock1984),and public investmentin theseregionshalted, inducing further economicdecline and large-scalemigrations to the cities, thus exacerbating social tensionsand conflicts.Poor economicmanagement duringthe 1980sand continuedactivityby ShiningPath have led to capitalflightand economy wide decline. Other countriesthat have experienced prolongedconflictsover land includeAngola, ChUle, and Nicaragua.Whilethe policiesthat createdand maintaindual land ownershipdistributions do not necessarily lead to violentstruggle- other interveningfactors are likely to be important- they clearly playeda significant role in manycases.

PARTU.: ANALYTIC CONTROVERSIES

The first questionwhichis centralto the analysisof past and futurereforms in grculura land relationsis: Are junker estatesand large mechanized farms economically more efficientthan smaller, family-operated holdings?The answeris importantbecauseif they are not, 34

or state farms Intofamilyfarms would or breakig up collective the ownershipdistribution equalizing the relationshipbetweenfarm size and and equity. In examining enhanceboth efficiency of scaIein processing of scale: economies we look firstat the sourcesof economies productivity, plantsthat are transmittedto the farm and generatewageplantations,lumpyinputsthat cannotbe skills, and advantages used belowa certainminimumlevel such as farm machineryand management arising from larger ownershipholding(section4). We then in the credit marketand in risk diffusion and diseconomies. the empiricalfindingson scale economies summarize This leadsto the secondcentralquestionfor land reform: if, as we find, large operational not rent to family in marketeconomies why do large landowners holdingsare usually inefficient, to been the most importantmechanism farmers (section6)? Tbe rental markethas historically of scaleassociatedwith large ownershipholdingsdespitethe incentive circumventthe diseconomies whichare reviewedin Section6. Yet the history of ssues associatedwith tenancyand sharecropping land reform showsthat long-termrental of entire farms often impliesa high risk of loss of land to rental of parcelsof land cannot tenants, and long term tenancyis no longeran option. Short-term holdings.But if tenancyis no longer an option, what preventsthe land createsmall family-operated of operational holdingsin line withthe optimaldistribution sales marketsfrom bringingownership in other markets, holdings? Our analysisin Section5 showsthat it is the result of imperfections broughtaboutby land-creditlikagtes andpolicy distortions.

4. Fsrm Size and Productivity Economiesof scale In processing export crops in to producespecialized have historicallybeen established Plantations labor. But and thereforehave had to importslavesor indentured areas of extremeland-abundance labor, wageplantationssurvivedin selectedcrops as even after the abolitionof slaveryor indentured holdingsusinghired labor to producea single cash crop. Most large ownership highlyspecialized plots of their own to workerslived in labor campson these wageplantationsand had no subsistence cultivate.

35

of total costs. Grigg (1974)and Courtenay(1980) Labor is the largestcomponent of productionof these discusshow the ability to use labor nearly year-roundfavoredthe organization crops under plantations,rather than with tenantsor outgrowers. Tree crops such as oil palm, rubber, and tea have the most even demandfor labor. Labor demandis more seasonalfor sugar and coffee, althoughirrigation(for sugar) or specificprocessing(for coffee)can help even out demand. Wage-based plantationscontinueto exist for tne typicalplantatdon crops - sugarcane, Economiesof scale arise from bananas,oil palm and tea becauseof anothertechnicalcharacteristic. the processingor marketingstage rather than in the farmingoperationsand are transmittedto the farm becauseof the need to processthe crops withinhoursof harvesting(Vnswangerand without Rosenzweig1986). Onlyfor these crops can wageplantationscompetewith smallholders relyingon coercionto acquirelabor. Economies of scale in processingaloneare not a sufficientconditionfor plantations. is crucial.Easily storedproductssuch The sensitivityof the timingbetweenharvestingand processing as wheat or rice can be boughtat harvesttime in the open marketand stored for millingthroughout of the farm. the year. Therefore, the economies of scalein millingare irrelevantfor the organization If cut must be carefullycoordinated. In the case of sugarcane,by contrast,harvestingand processing cane is left unprocessedfor morethan a day, much of the sugar is lost to fermentation. And to keep the expensivecapitalstock operatingthroughoutmost of the year processingcane into sugar, cane must be plantedat differenttimes of the year, even at times when the sugar yield is not at its maximum.Independentfarmerswouldbe unwillingto plan cane duringthose times without compensation.One wayto circumventthis problemis for sugar factoriesto run their own plantations, times and with a single managerwho decideson the tradeoffsbetweenharvestingcaneat suboptimal leavingthe capitalstock idle. Anotherwayis contracfarming (Hayami1992;Glover 1990). Contractingwith small farmers is widespread throughoutIndia, Thailand,and elsewherewhere sugarcanewas introducedinto an existingsmallholdersystem. problem. Mature Productionof bananasis anotherecampleof the coordination bananasmust be put into a cold boat within 24 hoursof harvest,an immensechallengefor the plantationand shippingcompany.Coordination is requiredto ensurethat the boat will arrive when the bananasare ready to be shippedand that a boat can be flled when it arrives,- for that reason, some 36

whoseholdingsincludedozensof are bananacompanies of the world's largestowner-operations operatedby hired managersand workers. In CentralAmerica,whenlegislationmade it plantations increasedtheir to own plantations,the majorbananacompanies for multinationals more difficult suppliesby buyingfrom contractfarms.These farms typicallyhave hundredsof hectaresand their (Ellis 1985). contractsare so tight that they virtuallyremainmanagedby the multinationals of of the harvestedproducttogetherwith economies rapid deterioration Similarly, of tea and oil palm on cultivation are the mainfactors leadingto the continued scale in processing of economiesof scale In dependson a combination plantations.Thus the superiorityof the plantation do not arise - or do not surviveonce labor problem. Plantations processingwith a coordination exist. Bananasfor local and nationalmarkets, coercionis abolished- unlessboth these conditions are suppliedby familyfarms all trucksrequiringlittle coordination, whichare suppliedby individual in Central traditionalunrefinedformsof sugar such as muscovado over the world. Similarly, of scale, were producedby familyfarms even did not involveeconomies America,whereprocessing by sugar plantations.In manycountriescoffeeand rubber are also cultivated dominated in economies than do sugarcane, for processing smallholdersystems.They have lower capitalrequirements undaer tea, or oil palm, and therefore,have a smalleroptimalcultivatedarea associatedwith a single processingunit. Despitetheir even labordemandover the year,the plantationmodeof production production. has thereforedeclinedsharplyat the expenseof smallholder followingthe abolitionof slaveryalso support The differentoutcomesfor plantations whichhad no coordination hypothesis.UnitedStatescottonand tobaccoplantations the combination and rented the land out to their former slaves, creating large-scalecultivation problem, abandoned landlordestates(arrow 17). The samethinghappenedin Latin America,exceptthat some farms in becamelandlordestatesand somehaciendas(arrows 16 and 17). Slave-perated sugar plantations the Caribbeanand South America,however,convertedto wageplantations(arrow 15). There are, of whatprecisepatternof productionrelationsresults course, other factorsat workas well determining three patternsaccordingto relative after slavery is abolished.Klein andEngerman(1985)distinguish intervention. lad abundanceand the presenceof government under survivein areas wherethey were first established Today, wage plantations densityand with a large land grant. Wherethe samecrops were of low population conditions 37

Introducedinto existingsmallholdersystems,contractfarmingprevails.Processorsseemnot to have and offeringthem wage contracts. found it profitableto form plantationsby buyingout smallholders problemassociatedwith plantationcrops can be solved at a This suggestseither that the coordination in land sales marketsare so severethat it relativelylow cost by contractfarmingor that imperfections is prohibitively expensive to createlarge ownershipholdingsby consolidating smallfarms (section5). Lumpy inputs Draft animalsfor plowingwere the first lumpyinput in agriculture.Becauseof the farmers and Rosenzweig1984),smdl1 diflicultyof farmingusing rented draft animals(Binswanger who lose their draft animalsfrequentlyrent out their land until they can acquirenew animals(Jodha 1984).Farmmachinery- threshers,tractors, combineharvester- are much lumpierthan draft animals.Tractors andharvestersreach their lowestcost of operationper unit area at a muchlarger Karl farm size rises with their introduction. scalethan do draft animals,so the optimumoperational of scale associatedwith agricultural Marx and his followersbelievedthat the economies were so large as to makethe familyfarm obsolete.Yetsmall owners can rent out their mechanization rather than sell it, as the ejidatariosin irrigatedareasof land to larger operators(consolidators) Mexicohave often done. So the initialeconomyof scaleassociatedwith machinesdoes not imply that holdings. reverse land reform is neededin areaswith many smallownership of scale the economies Machinerental can permitsmall farms to circumvent of operations,such as seedingin advantageassociatedwith machinesin all but the most time-bound dry climatesor harvestingwhere climaticrisks are high, wherefarmerscompetefor first serviceand thereforeprefer to own their own machines.' But threshingcan be done at any time of the year and as in Europeanagriculturein the late nineteenthcentury,the expansionof stationarythreshersin developingcountriestodayreflectsa well developed,efficientrental market. Harvestcombinesare often rented in the developedand developing world. Most Midwestern U.S. farmersrent themfrom operatorswho foliowthe progressof the harvest seasonfrom Oklahomato Canada.Tractorstoo are widelyrented out for plowingto small farmersin Asia, Africa, and Latin America,but the markets

14 BinsuwaWr andRosenzweig (1986) discuss thelimits to natalmarkets impsed by moa hazard snd msonality.

38

are not as problemfree as those for threshers(WorldBank 1984). Rao's (1975)analysisof India, followingthe over large farms initiallydisappeared shows that smallfarms' productivityadvantage holdingswas adjusted of tractorsin NorthwestIndia, but once the size of operational introduction upwards,the smallerfarms re-emergedwithhigherproductivityrates. increasethe minimumefficient with machines of scale associated Tbus, the economies farm size, but by less than expectedbecauseof rental markets.The use of draft animalsand machines - lumpyinputs- leads to an initial segmentof the productionfunctionthat exhibitsincreasingreturns wouldvanishwhenfarm size is increasedby with operationalscale, but thesetechnicaleconomies of machines the optimalscaleof lumpy inputsor when rental marketsmakethe lumpiness replicating irrelevant.Under constanttechnicalreturnsto scaleand with perfectmarketsfor land, capital,and of land wouldbe irrelevantfor productionand would only affectthe labor,the ownership-distribution would either rent the necessaryfactorsof production(abor and distributionof income.Landowners cost. in the capital)and make zero profitsoperatingtheir own holdingor, if there were transaction holdings. labor market, rent in or rent out land to equalizethe size of operational and lumpy input, so the better the skUlslike machines,are an indivisible Management manager,the larger the optimalfarm size. Technicalchangestrengthensthis tendency:fertilizersand skills. So does to pay for them - requiremodernmanagement pesticides- and arrangingthe financing of rapid technicalchange,acquiringand produce.In an environment the marketingof high-quality givingmanagerswith more formal becomesmore and more important, processinginformation the innovator'srents. edge in capturing schoolingand technicaleducationa competitive Therefore,optimalfarm sizes tend to increasewith more rapid technicalchange. consultants can be contacted from specialized and technicalskills, like machinery, Somemanagement services. Contractfarmingoften extension and advisoryservicesor providedby publiclyfinanced involvesthe provisionof technicaladvice.But key farmingdecisionsand labor supervisioncannotbe skills will leadto an upwardslopingsegmentin the unit boughtin a market. So limitson management cost curve as operationalholdingsize increases. Accessto credit and risk diffusion

39

Land, becauseof its immobility and robustness,has excellentpotentialas collateral, makingaccessto credit easier for the ownerof unencumbered land (the issue is discussedIn detail in section5). Rural credit marketsare difficultto developand sustain.There is thereforesevere rationing,whichcan be partly relievedby the abilityto provideland as collateral.The high transactioncosts of providingformalcredit in rural marketsimpliesthat the unit costs of borrowing and lendingdeclinewith loan size. Manycommercial banks do not lend to small farmersbecausethey cannotmake a profit. Raisinginterestrates on small loans does not overcomethis problem, since it eventually leads to adverseselection(StiglitzandWeiss 1981).For a givencredit value, therefore, the cost of borrowingin the formalcredit market is a decliningfunctionof the amountof ownedland. Land ownershipmay serve as a sign of creditworthiness in informalcredit marketsas well. Accessto credit is particularlyimportantin developingcountriesbecausethey usually lack other intertemporal marketsto insureagainstcrop or price risks. Insuranceis sometimes availablefor very narrowlydefinedspecificrisks such as hail or frost, but only for very large farms. Forwardmarketsare often bannedor discouraged by policy intervention. An interestedlocal insurer wouldhave enoughinformation to overcomethe moral hazardproblem,but the covariance of crop yieldsmakesthe risk uninsurable at the local level. A nationalinsurer couldovercomethe covariance problem, but lacksthe local information to overcomethe moral hazardproblem.The absenceof a marketfor multi-riskcrop insurmce is the result of the combination of moral hazardand the local covariance of productionrisk. The absenceof crop insuranceand forwardmarketsconfersspecial importance on accessto credit as an insurancesubstitute,but the combination of covarianceand moral hazardalso sharply reducesthe potentialof financialintermediation in rural areas (Binswanger and Rosenzweig1986). Providingfunds to overcomeemergencies is a commonfunctionof informalrural credit markets. But the amountssmall farmerscan borrow for consumption are usually tiny - and often at high interest costs (Binswanger 1985;Christensen1989;Morookaand Hayami1990;Udry 1990;Deaton 1991). Investigations into how farmersand workerscope with disastershow that credit financesonly a small fractionof their consumption in disasteryears (Jodha 1978).Accessto formal commercialbank credit thereforegives large modemcommercialfarms a considerable advantage in risk diffusionover small farmerswithoutsuch access.

40

Farmers and workerswith little or no accessto credit can attemptto diffusetheir risk by relyingon accumulated reservesand wealth,social relationships, and risk-sharingarrangements in land, labor, output and input markets(Jodha 1978;Bidingerand others 1990;Rosenzweig1988; Deaton 1990;Sharp 1990).Wealthyindividuals can self-insuremuchmore easilythan the poor both directly,as a consequence of their wealth,and indirectly,becausegeographically dispersedsocial networkson whichthey can rely in years of (ocally covariate) poor harvests.Wealthyfarmersshould thereforebe better able to accumulate profit-maximizing portfoliosthan poorer farmers,givingthem
5 In land-scarce an allocativeefficiency advantage." environments, the bulk of a farmer's wealthis in

the form of land, so large ownershipholdingsare correlatedwith a better abilityto diffuserisks throughthe wealtheffectand land's robustness as collateralfor credit. Forescano(1969)suggeststhat in high risk environments, the superiorabilityof land-richindividuals to diffuserisk throughstorage and better accessto credit marketsmighthave been an importantreasonthat otherwiseunprofitable demesnecultivation survivalin the faceof competition from familyfarms. Evidence on farm size - productivity relationship The literaturedemonstrates that imperfections in a singlemarketwould notbe sufficient to introducea systematic relationship betweenfarm size and productivity per unit of land. For example,if credit is rationedaccordingto farm size, but all other marketsare perfect, land and labor markettransactions will producea farm structurethat equalizesyieldsacross farms of different operationalsize. But if there are imperfections in two markets,land rental and insurance,or credit and labor, a systematic relationshipcan arise betweenfarm size and productivity. Srinivasan(1982)has shownthat under conditions of fixedfarm size (no land rental)and no insurance,uncertaintyand risk aversioncan lead to an inverserelationship betweenfarm size and productivity,providedthat absoluterisk aversiondoes not increaseand that relativerisk aversiondoes not decreasewith wealth.With credit and labor marketimperfections, the relationship is not necessarilyinverse. For example,Feder (1985)and Carter and Kalayan (1989)demonstrate that with certain modelparameters,the combination of credit and labor market imperfections can leadto a is As explained in Binswanger andRosenzweig (1986), theyarenotableto provide icsran to small
farmers bocause covunanceof inome wouldrequire largereservesin order to be able to offercraedible conrct.

41

U-shapedrelationship. Eswaranand Kotwal(1985)obtain an inverse relationship by addinga fixed cost of productionto labor and credit market imperfections. Generally,the presenceof multiple marketfailurecan explaina varietyof farm size distribution and productivitystructures. The implications of imperfections in labor, credit, and land marketsare illustratedby Feder (1985)whosemodel is replicatedin Appendix2. By assumption,the efficiency of hired labor dependson the intensityof supervision by familylabor, implyingthat familylabor and hired labor are complements and that the amountof labor effortor 'efficiency' units suppliedincreaseswith supervision. If credit and land rental marketsare perfect, the supervision constraintalone would lead each householdto lease in or lease out the amountof land requiredto maintaina uniformratio of familylabor endowment to operatedarea. The ratio of effectivelabor inputto operatedarea wouldbe constantfor all cultivators,whateverthe distribution of land ownership.No farm size-productivity relationshipwouldexist. But if there is a bindingconstraintin the credit market wherebythe supplyof working capitaldependson the amountof land owned,the optimalsize of the operational holdingwouldvary systematically with size of the ownedholdingeven if land rental marketswere perfect. The magnitude (and direction)of this variationwoulddependon the relativeelasticities of output with respectto effectivelabor and of labor effortwith respectto supervision. Now, if, in additionto a supervision constraintand a credit constraint,there are no rental marketsfor land - whetherby law or becauseof the threat of land reform - a negativerelation betweenfarm size and land productivityis likelyto emerge. Of course, the capitalcost advantage of large farms does not necessarily lead to higher investments on the farm if the capitalcan be invested elsewherein the economyat higher returns than in agriculture. The Evidence for Diseconomnes of Scale The discussionthus far suggestsseveralapproachesto the measurement of the farm size-productivity relationship: 42

Sincethe supervisioncostsvary withthe operational holdingsize whilethe capitalconstraint is relatedto the ownershipholdingsize, the separateeffectsof operationaland ownership holdingsshouldbe distinguished in any test of the farm size-productivity relationship. To eliminateerrors resultingfrom the raw correlationof farm size andhouseholdsize, regressionsof an efficiency indicatoron operationaland ownership holdingsize shouldalso includethe numberof adultfamilymemberswho can act as supervisors.None of the existing studieshas taken full accountof these distinctions.

Propermeasuresof relativeefficiency are the differencein totalfactorproductivitybetween small and largefarms and the diference in profits, net of the cost offamily labor,per unit of capitalInvested.Usingmarketpricesto measureproductivityassessesdifferences in private efficiency. Using socialopportunity costsas a measureeliminates the impactof distortionand measuresdifferences in socialefficiency. Few studieshave madethis distinction.

Mostof the literaturehas analyzed physicalyields of specificcrops or the valueof agricultural outputper unit of operatedarea. Theseare not relevantmeasuresof overall privateor social efficiency sincethey are but partialproductivityindicesthat do not take into accountdifferences in inputand labor use. Becausepart of the adjustment to incentive problemsand other marketimperfections is to vary the outputmix so as to saveon the factors with the highest scarcityvalue in the specificfarm, focusingon a singlecrop is inappropriate exceptin monocropfarmingsystems.Individualcrop studiesare thereforenot relevantto the farm size-productivity relationship problem.

Normalizing any productivity measureby total land area or regressingit on land area raises severe measurement problemsbecauseagroclimatic potentialand land qualitydifferacross regions.Ihe sameproblemafflictsany comparisons that involvepooled dataor use the means from severalregions (e.g., Thiesenhusen1990;Deolalikar1981).Land qualitydifferences withinregions are often so large that adjustments must be made for those differences if productivityis measuredper unit area rather than per capitalinvested(Bhallaand Roy 1988). Only if there is no correlationbetweenland qualityand farm size is such an adjustment

43

unneeswary16 - or if the differences arise from farmerinvestments in tubewells,land levelling,drainage,or the like. The followingtest of the farm size-productivity relationshipis one wayto take these considerations into accountdescribingnot a causalrelationship but a multiplecorrelation: PIK = g(OPOW,H,Z) withexected signsg8<,g 2 >Ogy>O, (1) WhereK is assets, L is labor, P is privateor socialprofitsnet of privateor social cost of familylabor, OP is operatedarea or value of operatedland, OW is ownedarea or value of ownedland, H is the numberof householdworkers,and Z is a vector of exogenous land quality,distancefrom infrastructure, and exogenous land improvement variables. g, should be negativebecauseof rising supervision costs. g2 shouldbe positivebecauseownership providesbetter accessto credit. And & shouldbe positivebecausefamilymembershave incentive to workand can supervise. None of the studiesof the farm size-productivity relationships have appliedthis full specifications and few studieshave even lookedat total factorproductivityor farm profitsnet of the cost of family labor. So we must be contentto summarizethe findingsof farm-level studieswithinsmall regionsthat look at value of outputper operatedarea. Typicalfindings are presentedin table 2, whichis extractedfrom Berry and Cline (1979)and similarresults
7 are found in a range of other studies.'

"Both distress sales(Bhagwati andChakravarty 1969) anddifferential patterns of invesmet (Sea1964) coud explain theoretically whysmallfarmers couldsystematicaly endup withhigherquality landwithin a given villae. Few empirical studies existat a sufficiently disggregated village levelto confirm thisasociation Forsix villages in semi-arid India,Walker and Ryan(1990) rejectthe existence of a systemticassociation betwe farm size and landquality. For SiX Lain Americancountries Lu andYotopoUlos 1971,and 1979,BarraloughandCollarte 1973; for nortesten Brai Kutcherand Scandizzo1981 ; for fifteencountria in Africa,Asia, and Latin America Comia1985; for theIndian PunjabSen1981;for IndiaandWestBengal Cater 1984; andfor Ildia
1

disggrgated into seventy-eight agroclimatic zonesBhallaand Roy 1988.Dyer 1991descnbes the army of intument used by largeproduce in Egyptto increasetheir competitiveness with smallfarmers, deostaing that largeproducerscan successlly lobbyfor meaure to counteact the inverse fam-size productivity relationship. Te need for such rent-seelng impliesthe coniued validityof this relationship althoughDyer interpret it to meantheopposite. 44

TABLE2: Farm-sizeproductivitydifferences, selectedcountries

Fam size NorthuatBrazil Punjab, Pakistae Muda,MaLkydi

Smallfarm (heatr)
Larva fm

563 (10.0-49.9)
100

274 (5.1-10.1)
100

148 (0.7-1.0)
100

(hectarft) Note:

(SOO+)

(20+)

(5.7-11.3)

*100- bqet fam sizecomparedwith secondsmallestfarm size. Secondsmallestfam size used in calculations to avoidabnormal productivity resultsoftenrecordedfor the smallet plots. lable 4-1. Northeastern Bazil, 1973;Production per Unit of Available LandResource,by Farm SizeGroup,p.46. Indextakenusingaveragegross receipts/areas for sizegroup2 (small) and 6 arge), averagedfor all zonesexcluding zoneF, where sugarcane and cocoaplantations skewproductivity averagefor argo farms. able 4-29. RelativeLandProductivity by Farm Size: Agricultural Censusand FABSSurveybasedEstimates Compared,(1968-9) p. 84. Indextakenusingvalueaddedper cultivaedacre for secondsmallestsize roup and luagest 'Table 4-48. FactorProductivity of MudaRiverFarmsby Size, DoubleCroppers,1972-3p. 117. Index takenfrom valueaddedin agriculture/relong (0.283ha = 1 relong). Berry and Cline (1978)

Soue:

Those studies support the following generalizations:

Ihe productivitydifferential favoringsmall farms over largeone increaseswiththe differences in size. That meansit is largestwhere inequalities in land holdingsare greatest,in the relativelyland-abundant countriesof Latin Americaand Africa, and smallestin land-scarce Asian countrieswherefarm size distributions are less unequal.

The highestoutputper unit areas is often achievednot by the smallestsubfamilyor part-time farmersbut by the second-smallest farm size class, whichincludesthe smallestfull-time farmers.This suggeststhat the smallestfarms may be the most severelycredit constrained.

Plantationcrops as represented by sugarcaneproductionin Brazil, do not exhibita negative farm size-productivity relationship(Cline 1971;Kutcherand Scandizzo1981).

When land is adjustedfor differences in quality using land value or exogenous land quality measures,the negativeproductivityrelationshipweakensbut does not disappear,especially where it is very large.

45

Introduction of the green revolutiontechnology in India led to a weakeningbut no the of the raw productivitydifferentials (Bhallaand Roy 1988). disappearance Three studiescame closer to the specification in equation1. For the Muda River region

of Malaysia,Berry and Cline (1979)found that valueaddedper unit of investedcapitalfor the second smallestfarm size group exceededthat of the largestfarm size group by 65 percent, more than the differencein valueof outputreportedin table 2. The use of valueadded adjustsfor costs of but thismeasureis still likelyto bias the test in favor of small farms to the degree purchasedinpUts, than do large farms. But since the resultholds for raw that smallfarms use labor more intensively wouldprobablyhold as well if the test were based on net farm output, the negativerelationship rental markets, as in the Muda area for tractorsand profits. The resultssuggestthat well-developed the economies of scale associatedwith tractors, leaving threshes,enablesmall farmersto circumvent costs to dominate." labor supervision In the secondstudy, Berry and aine (1979)firstsplit the data for NortheastBrazil (see zones, whichsharplyreducedthe observednegativerelationship.'Social' table 2) into agroclimatic cost of 15 percentto capitaland valuing by imputinga real opportunity profitswere then calculated familylabor at 0, 50 and 100 percentof the minimumwage, a wagerarely paid in agriculture.Even when familylabor is valuedat the full opporuity wage, socialprofitsare dearly higherby 23 to 150 percent for the secondsmallestfarm size group (10 to 50 hectares)than for the secondlargest and the largestfarm size groups (200 to 500 hectares)in four of six non-sugargrowingzones. For does not hold as clearly (Bahlaand Sertao),the weaknessof the the two zones where the relationship results appearsto be due to paucityof obsvations (Kutcherand Scandizzo1981).The negative
(1986) test for the sepambility of fimily and hired labor. Pitt and Rosenzweig ' Only a few studies explicitly of the short-tm healthstatus of the of Indonesian fannmes thatprofits are independent showfora sample household head,but sinceshort-temillne doesnotinterfere withsupervision the resultsayslittleabout (1987) reject family laboron a pmnet bi Deolaliar andVijverberg wagelaborcancomplement whether thehypothesis of perfect substitutabiltybetween family andhiredlaborbased on samples from ndiaand Maaysia,but beas they estime a pduction functionusingcoss-ction data, atistical problemsvitate their findings.Benjamin(1992)estimates a demandfimction for aegate laborservices.He rejectsthe the basisof thejoint lack of significane of hypothei of nonseparability for Indneian rice fam aon includes ar havesteda a dependetvariable, it doesnotallowfor demogaphic variables. Since his model adjustmensof area operated(via rt) in responseto familysiz. In effect,then, the modelmeures only the variables,givenopeatod ea, on the demad for hired labor. The fact that conditionalimpactof demographic
that

withfamily composition suggests has sigificantinfluence onlabor demand) s correlated ea opeated(which, effectwere considered. a strong supervsionconstraintmightbe foundif the unconditional 46

productivityrelationshipstill holds in the technologically advanced Agrt .. region, where mechanization was most pronounced if socialprofitsare considered. In the third study, Rosenzweig and Binswanger (1993)estimatea profit functionsimilar to equation(1) whichincludetotal assets, the composition of the asset portfolio,familylabor, education,age, and the onset dateof the monsoon. Theyuse the complete ICRISATpanel data from ten villagesin high-risksemi-aridIndiato estimatea model that allowsfor separatetestingof technicaleconomies of scale on the one hand and the impactof supervisioncost advantages of poorer farmersrelativeto the capitalcost and risk diffusion advantages of wealthierfarmerson the other hand. Fixed-effects estimation techniques were used to eliminateproblemsof land quality differences.The resultsreject the hypothesis that the composition of investments reflectstechnical scale economies. They supportthe hypothesis that the asset portfoliosof farmersare signifcantly affectby farmers' risk aversion,wealth,and the degreeof monsoononset variability(a measureof weatherrisk). In an environment of slowlychanging technology, the profitability of the portfoliois not affectedby formalschooling,but it does rise withage, a proxy for experience.Profits(net of their wage costs)also increasewith the numberof adultfamilymembers,suggesting that their contributionarises from their management and supervision function. Rosenzweig and Binswanger also estimatethe impactof weatherrisk and wealthon the risldnessand profitability of farmers' asset portfolios.Figure 3 plots the profit per unit of asset for four wealthclassesas a functionof rainfallvariability(onsetof the monsoon).The profit rate of farmers at the eightiethpercentileof wealthis insensitive to IncreasesIn weatherrisk, suggesing that they are confidentenoughin their abilityto diffuserisk throughcredit, savings,or socialrelationships that they do not need to chooseportfoliosthat reducerisk up front at some cost in profits. Farmers in the 20th percentile,however,sharplyreducethe profitability of their portfoliosas rainfallrisk rises. Despitetheseportfolioadjustments, this high risk environment with relativelylittle mechanization and slow technicalchange,the smallerfarm size groupshave higherprofitsper unit of wealthat all levels of rainfill risk observedin the data The supervision and laborcost advantages of familylabor are apparendygreaterthan the advantages that the lumpiness of management skills ad machinesand the better accessto credit and other risk-diffusion measuresconfer on large farms. Only in the most risky environments does the advantage of the poorer farmersnearly disappear. 47

Figure 3.

Profit-WealthRatios and Weather Variability, by Wealth and Class

034029 0-24 _
*_

-_-_

19- .'*

0I09 1 9-6

11-6

13-6 156 17-6 19-6 21-6 Monsoon onset standard deviation(weeks)

23 6
, 20

3. Profit-wealth ratios and weather variability, by wealth class. Pcrcentiles: -- , 40th; -- , 6oth;---, 8oth.

Note:

The onset date of 4p.eMonsoonwas the singlemost powerfulof eight differentrainfallcharacteristics to explain grossvalueof farm output.
48

Usinga nonparametric approachto estimatea productionfunctionfor Wisconsin farmers, Chavasand Allier (1993)study farms in a very modernand dynamicenvironment.They flndvirtuallyno scale economies in dairy productionand only very limitedinitialscaleeconomies due to lumpinessof Inputs. Condusion Most of the empiricalworkon the farm size-productivity relationship has been flawedby methodological shortcomings, and has failedto deal adequately with the complexityof the issues involved.Studiesthat come to grips with someof the shortcomings and use a more refined measurement of land qualityand a productivity variableInsteadof simpleyieldsfindthat even in fairly technologically advanced and mechanized areas, such as the Muda schemein Malaysia or the Agresteregionof NortheastBrazil, smallfarms retain a productivityadvantage over large farms. This findingsuggeststhat rental marketscan substituteto a certaindegreefor the indivisibility of machines and some management skills.The methodologically sounderstudybased on the ICRISATdata confirmsboth the mechanisms leadingto differential performance by scale and the superiorityof smallerfarms in an environment with litde mechanization and slow technicalchange.Whilethere is evidenceon the negativerelationship betweenfarm size and production,more work is neededon this subject. Suchwork shouldfollowthe lines sketchedout in equation1, using recentfarm level data for developing coutry regionswith high qualityagroclimatic and soil conditions,substantial mechanization, and dynamictechnicalchange.

S. The effectsof land-credit Unksand policy distortions on land sales markets The farm-sizeproductivitystudiesindicatethat for given technology, factor prices, land quality,and farmingsklUls there is an optimaloperatdonal holdingsize at whichthe disincentive costs of addingmore workersfilly offsetsthe economies of scale from lumpyinputs, accessto credit and management skills. Takinginto accountdifferences in hrming skills and land quality,this finding translatesinto an optimaldistribution of operational sizes. For any givendistribution of ownership holdings,one would expecttenancyand land rental marketsto bring the distribution of operational holdin close to that optimaldistribution. f incentive problemsassociatedwith tenancyare minor 49

and can be ignored,the distribution of ownershipholdingswouldbe Independent of the distributionof operationholdings,since large landholders wouldsimplyrent out their land with no loss in efficiency. But if legal restrictionson tenancymake this optioninfeasibleor unprofitable we need to ask whetherthe sales marketwill bring abouta more nearly optimaldistribution of ownershipoperationalholdings- that is, whetherit will be profitablefor the owners of large and relatively unprofitablefarms to split them up and sell themto small familyfarmers.Covariaterisk, imperfect Intertemporal markets, and policydistortionsaffecting the functioning of the land sales market will preventthis marketfrom achievinga first-bestsolution.But increasesin efficiency arekstill likelyto result from sales transactions that transferland from bad to better managers. Covariate risks and Imperfect credit markets Land is oftena preferredstore of wealth, so with imperfectinter-temporal marketsthe utility derivedfrom landownership will exceedthe utilityderivedfrom farm profits. Its immobility makes land a preferredform of collateralin credit marketswhichconfers additionalutilityfrom landownership, especially in an environment whereproductionrisk cannotbe insured. 'he collateralvalue of land and the high positivecorrelationof incomesin a given area imply that there would be few land sales in periodsof normalweather."' Landowners wouldbe made better off by sellingland only if they could ear a higherreturn from the sales proceedsthan from cultivating or rentingout the land. So, wherenon-agricultural investment opportunitesfor ru residentsare limitedand nationalcredit marketsare underdeveloped little land will be suppliedfor sale in normalyears. Tbe numberof biddersfor land is constrained by the level of householdsavings since mortgagingthe land wouldbe unprofitable. Becauseland has collateralvalue, its equilibrium price at given credit costs will alwaysexceedthe present discountedvalue of the incomestream producedfrom the land. Mortgaged land, however,cannotbe used as collateralfor workingcapital, so the owner does not reap the productioncredit advantage and thus will be unableto repay the loan out of increasedincomefrom the land. Withimperfectinsurancemarkets,only unmortgaged land 1 Suchpaucity of lad salesis alsoobserved in developed countreswhere landsalesmaketsarn usually verythin.The perete of rnmland transfend an avemg eachyearis 3% of thetotalin the US, 1-1.5% in Bditain, 1.5%within thowhitesectorin SouthAfrica,0.5%i Ireland andKenya (Moll1988:354).
50

yieldsa flowof incomeor utility,the present valueof whichequalsthe land price. As discussed,if the providesaccessto credit and helps in risk diffusion,the buyer has to compensate land ownership seller for the utilityderivedfrom these servicesof land (Federand associates1988). Sinceonly land providestheseservices,a buyer relyingon credit cannotpay for the land out of unmortgaged profitsalone. Thus land sales are likelyto be fianced out of householdsavings, so that agricultural the purchasedland can be used as collateralfor workingcapital.This need to purchaseland out of more unequal,despitethe greater utilityvalue of landholdings savingstendsto make the distribution of land to smallerownersarisingfrom its insurancevalue and their lower labor costs. in yieldssuggeststhat in particularlygood crop years, whensavings Spatialcovariation are high, there wouldbe few sellersand manypotentialbuyersof land. Good years are thus not good times for land purchases.In bad crop years, farmerswouldhave litdtesavingswith whichto finance harvest failures- moneylenders land purchases.And in particularlybad periods- say after consecutive with assets(their debt claims).Moneylenders wouldbe the only ones in the local rural economy offeredas collateralby defaulterssince the wouldprefer to take over rather than sell the landholdings price of land wouldbe lower than averagein bad years. So, in bad crop years land wouldbe sold with incomesor assetsfrom outsidethe as distresssales, or to individuals mainlyto moneylenders local rural economy.We shouldexpect, then, that in areas withpoorly developedinsuranceand capitalmarkets,land sales wouldbe few and limitedmainlyto distresssales. Resultsfrom India and drought years two consecutive confirmthis hypothesis.Farmers in India experiencing Bangladesh and have been found to be 150 percentmore likelythan other farmersto sell their land (Rosenzweig Wolpin1985). to insureagainstrisk on distresssales and the land of differentmechanisms The implications of the evolutionof ownershipholdingsfrom by a comparison ownershipdistributionare demonstrated (Cain 1981). villagesin Indiaand Bangladesh agricultural about 1960to 1980for predominantly in by distinctdifferences risks but were characterized These villagesfaced very high environmental guaranteeschemeoperated In Mharashtra, India, an employment of risk-insurance: mechanisms rates of up to 97 percentof all householdsduring throughoutthe period and attainedparticipation With other disasters.Such schemeswere absentafter the major floodepisodesin Bangladesh. were either absentor exhauted, 60 percentof land sales in Bangladesh Insurance-mechanisms mobilityaffectedlarge and small farmersequally, undertakento obtainfood and medicine.Downward Sl

suggesting that even large farmershad insufficient possibilities to diffuserisks. 60 percent of the currentlylandlesshad lost their land since 1960and the Gini coefficient of landownership distribution increasedfrom 0.6 to almost0.7. This contrastssharplywith the Indianvillageswhereland sales for consumption purposesaccounted only for 14 percentand were incurredmainlyby the rich to meet social obligations. 64 percentof land sales were undertakenin order to generatecapitalfor productive investment(diggingof wells,purchaseof pumpsets,children'seducationand marriages),leadingto an equalization of the land-ownership distribution in India, and suggesting that the poor were not only able to avoiddistresssales, but actuallycouldacquiresome la,' as rich householdsliquidated agriculturalassets to be ableto pursuenon-agricultural investment. Historically,distresssales have playeda major role in the accumulation of land for large manorialestatesin China (Shih 1992)and in early Japan (Takekoshi1967)and for large landlord estatesin Punjab (Hamid1983).The abolitionof communaltenure and the associatedloss of mechanisms for diversifying risk are amongthe factorsunderlyingthe emergenceof large estatesIn Central America(Brockett1984). Moralhazard, covarianceof income, and collateralvalueof land imply absentinsurance and imperfectcredit markets. In such environments, land sales marketsare likelyto becomea means for large landowners to accumulatemore land. Even wheremarketsfor labor, currentinputs, and land sales and rentalsare perfectlycompetitive, weak intertemporal marketsfor risk diffusionmay thereforeprevent land sales marketsfrom bringingaboutpareto improving trades and an efficient farm size distribution- an illustrationof the theoremof the secondbest. The Impact of policy distortions The existenceof commonpolicy distortionsintensifies the failureof the land sales marketto distributeland optimally. Consideran idealizedcase of competitive and undistortedland, labor, risk and credit markets.The value of land for agricultur use wouldequal the present value of agricultural profits capitalizedat the opportunity costsof capital.If the poor have to borrow to buy land at its present value, the only incomestreamavailable for consumption is the imputedvalue of familylabor. The remainingprofitsgo to pay for the loan. If the poor can get the same wage in the labor market, they are no better off as landowners than they wouldbe as wage-laborers. Ard this 52

exampleassumesideal conditions,with the poor payingthe same interestrate as most creditworthy borrowers. Anythingthat drivesthe price of land abovethe capitalizedvalueof the agricultural incomestreamthus makes it impossible for the poor to buy land withoutreducingtheir consumption belowthe level of their potentialearningin the labor market. The most importantfactorsand distortionsare the following: * Withpopulations growingand urban demandfor land increasing,the price of land is expected to appreciate,andsome of this real appreciation is capitalized into the currentland price. Robinsonand associates(1985)findmuchhigherimp'icitrates of return (cash rents to land values)to farmingin predominant agriculturalstatesin the UnitedStatesthan in stateswhere nonagricultural land demandis high. The impactof closeness to urban areason agricultural land prices iswell known.Sincethese returnsare realizedonly when the propertyis sold, the only way a poor personcouldtap into that incomestreamis by regularlysellingoff a small parcelof land to pay the interestcosts- hardly a feasibleoptionfor small landowners. * In periodsof macroeconomic instability, nonagricultural investorsmay use land as an asset to into the real land price. If hedgeagainstination, so that an infation premiumis incorporated epected inflationis fully reflectedin interestrates, inflationalonewill not affect agricultural land prices (Feldstein1980).But if inflationis higherthan expectedinterestrates, and if land assets, excessdemandfor land will increasethe is perceivedto be no riskier than alternative price of land as a speculative asset. Inflationand changesin real reurns on alternative uses of capitalare the mainfactors explaining changesin land prices for the UnitedStates(Just and Miranowsld1989). For Iowa, in additionto fundamentals, (the presentvalue of the discounted future incomestream), an additivefad term closelyassociatedwith expectedinflation has a significant impacton land prices (Falk 1991). In a simulationusing resultsof econometric Although overvaluation dueto mispeetion - bubbles - would lead to observationally equivalent predictions, myopic behavior on thepartof landpurchasers seems a moresatisfactory explanation. Onthe
poubilities for rational bubblessee Asako(1991)andDiba and Grossman (1988).Empiricaland experimental evidee an bubblesis provided buy DeLng andShlcifer(1991),Smith andassociated(1988),andEvans (1986).

53

estimationfor Brazil (1966-89) Brandaoand Rezende(1992)find that six percentof the instability to credit subsidies,28 percentto macroeconomic IncreaseIn land is attributable (inflation). * Credit subsidiesare capitalizedinto land values,as shownin the Brandaoand Rezenda(1992) study and by Feder and Associates (1988). For the U.S., Shalitand Schmitz(1982),showthat most of the increasingdebt on farm real estateduring 1950-78was translatedinto higher land
21 Even wherethere are prices, whereasfarm incomeincreaseshad a muchsmallerimpact.

in securingcredit, have a transactions cost advantage no credit subsidies,large landowners whichis capitalizedinto land values andmay even block accessto mortgagecredit altogether for smallborrowersaltogether.
a

Manycountriesexeempt agriculturalincomefrom incometax, and even wherethere is no general exemption,agriculturalincomeis de facto subjectto lower tax rates. These preferences into land values. Sincethe poor, pay no taxes and so cannot will be partly or fully capitalized incomestream. Any other benefitfrom the tax break, they do not receivethe corresponding the poor have in subsidiesor tax preferencesfor large farms similarlyincreasethe difficulty buying land. Whereany of these factorspush the price of land abovethe price justifiedby the

profitsin the absenceof distortionsassociatedwith farm size, of expectedagricultural fundamentals buyingland. Even If they are providedwith credit on marketterms that the poor have difficulty difficulty persistsunless their productivityadvantage from lower supervision cost is very large. Of these factors,nonagriculturl demand,inflation,credit constraints,and credit subsidieshave been investigated empirically;incometax preferencesfor agriculturehave noL Mostof the empirical studies concentrate on the United Statessincethe paucityof land transactionsin developing countries

enirment in aggregae models, Whiloe tis dem ate the sgnificaneof thepolcy andinstitutional icroconomic evidenceon theimpostnce of credit ratining on landpricesis limited. Carter (1989),Carter
21

and Kalfaya (1989), and Cart and WVibe (1990)use a roughlycalibrad modelto determinethe reservation priceof lnd as a functionof frm-sz and obtaina U-shaped cumre.Becase of the roughnessof their dat, but theyare certainlyin theapproprate theresuts indicate ordersof magnitude rather thanexact figpues, dirton. 54

makesresearchdifficult(Melichar;four other studies;Hallanet al; Barhema).More work needsto be done.

6. Incentives, land-credit Unksand land rental markets As long as there are imperfections and/or distortionsin other markets,land sales marketsare unlikelyto bring a skeweddistribution of land ownershipholdingscloser to an optimal distnrbution of operationalholdings. The question,then, is whetherland rental marketscan increase efficiency by improvingthe accessof the poor to land under conditions in whichthey can not buy land. Land tenancymarketsmightnot increaseefficiency if tenantslack incentives to investin land improvements, to workhard, or to applysufficient inputs. Theseproblemswill be particularlysevere under sharecropping aangements, with the tenantreceivingonly a share of the marginalproductof the inputs(the Marshallian inefficiency).Quantitative measurement of the inefficiency associatedwith share contractsin differentenvironments is nceay the farm level, are not large. Despitethe disincentives associted withtenancyand sharecropping their widespread use all over the worldsuggeststhat, in an enviroment, wherecapitalconstraintsand risk considerations make fixedrent tenancycontractsinfeasible, share rental contractsmay in fact emergeas efficiency enhancing,especiallyif the incentive problemsassociatedwith themare low. Since both the theoreticalliterature(Otsukaand Hayami1988;Otsuka,Chuma,and Hayami1992)and the empirical literature(Bell 1988)have been reviewedrecenty, the discussionhere is brief. Choice of contract and the inetive problem In the basicmodel of land-leasing, rentingout land under a fixed-rent or share coneract or employing wage labor are substitutesalonga continuum on contractual choices(Otsuka,Chuma and Hayami 1992).The landlordmaximizesincomeby choosingthe numberof tenants,the fixed 55
to

determinethe importanceof such

disincentives. The empiricaldiscussionshowsthat the inefficiencies of share-cropping, measuredat

paymentandthe output-share parametersubjectto the constraintthat tenantsachievetheir (exogenously given)reservationutility.The tenantdeterminesthe level of effortthat will maximize function. utility,yieldingan effort-reaction The basic model consistsof a constantreturnsto scaleproductionfunctionQ = OF(e,h) where Q is output, e is effort,h is numberof tenants, and 0 is a stochasticelement. The landlord's incomeis y = h[l-&)Q- pl, and the representative tenant's incomeis Y=caQ + p. Thefixedrent contractis obtainedfor (ar=1,p<O), the pure wage contractfor (a=O,0>O); and {0<a<< 11 with arbitraryp (often assumedto equalzero for simplicity)characterizes the share contract(Otsukaand Hayami 1988). Under conditions of certaintyand the rather unrealisticassumption of perfect outcomesand the choiceof contracttype does enforceability of effort, all contractsleadto equivalent is dropped,the tenant of perfect effortenforceability not matter (Cheung1967). If the assumption receivesonly a fadicn a of their marginalproductfor all but the pure cash rental contract. and under conditons of certainty(or equivalent,risk neutrality), Therefore, with effortunobservable and the share contract and will alwaysbe the fixed-rentcontractclearlydominatesthe fixed-wage costs for workersor (Otsuka,Chuma,and Hayami1992). Givensupervision chosenin equflibrium of effortby sharecroppersany type of contractother than fixedrent wouldresult in an undersupply the tenantor worker, whichwouldlead to lower total production. With risk aversionand uncerinty, a share contractprovidesthe possibilityof pardy marketsare weak or insuringthe tenant againstfucations in output.Where intertemporal unavailablo, there would then be a trade-offbetweenthe risk-sharingpropertiesof the fixed-wage contractunder whichthe worker's residualrisk is zero, and the incentiveeffectsof the fixed-rent contract,which is associatedwith the optimalsupplyof effort. (Note that with effortas the only determines total production.)Under these empiricallyrelevant variableinput, effortsupplycompletely the one-periodcontractcan achieveonly a second-best conditions of risk aversionand uncertainty, equilibrium value, while solutionsince increasesin the outputshare parameterabovethe second-best increasingexpectedproduction,are no longerPareto superiorsince they lower the risk-aversetenant's utility by exposinghim to greater uncertminty.

56

effects, contextand allowingfor reputation Recastingthe problemin a multiperiod however,providesoptionsfor bringingthis second-bestopdmumcloserto the firstbest outcome. context, the under which, In a multiperiod Otsuka,Chuma,and Hayami(1992)discussthe conditions threat of loss of reputationwill preventthe landlordfrom cheating,and so the fixed-rentcontractwill contractas it does in the certaintycasejust described.They argue tend to dominatethe fixed-wage may be strong enough by the community that in relativelyclosedvillages,such Implicitenforcement contractcloserto the first-bestoutcomeeven outcomeunder the unenforceable to bring the inefficient that fixed-wage is consistentwiththe empiricalobservation if risk is present.This conclusion againsttenancycontracts discriminates environment contractsare found only wherethe institutional prevalenceof share-cropping with the overwhelming (see section3 and below)but is inconsistent tenancies. relativeto fixed-rent Choice of contracts and factor market constraints and evidence(Blissand Stern 1982;Pant justification theoretical There is considerable 1986;Skouflas1991;Shaban 1991)that where and Rosenzweig 1983;Nabi 1985;Binswanger seek skills and draft animalsare imperfect,households marketsfor lumpyinputssuch as management holdingsize throughland tenancycontracts.Giventhe nontradable to achievethe optimaloperational if a fixed-rentcontractis factor endowment,land rental wouldbe expectedto increaseefficiency as well. chosen. The relevantquestionis whethershare contractswouldincreaseefficiency to the tenant(or to landlordand tenant)because A limit on the workingcapitalavailable of imperfectionin the credit market, can leadto the adoptionof a share contractas the optimal problem.Laffontand Matoussi(1981)showthat a worldngcapital solutionto the bargaining contract constant imposeslimitson the share parametera that may makethe first-bestfixed-rent unfeasible.Their model impliespositivecorreladonbetweenthe tenants' workingcapitaland his output share a. A positivecorrelationbetweenworkingcapitaland outputin the share contractbut the absenceof such an effectin the fixedrent contractwould indicatepresenceof an incentive to tenantand landlorddoes imply a of the joint workingcapitalavailable problem. Consideration negativerelationshipbetweenthe landlord'sworkingcapitaland the tenant's share. All of these for a set of datafrom Tunisia. his direct dependenceof the predictionsare confirmedempirically opdmalchoiceof contracton the workingcapitalavailableto both landlordand tenantmay account 57

for the coexistence of a varietyof contractsin the sameenvironment amongparties with roughly similar risk aversionbut differentendowments of workingcapital. Thus the mainreasonthat nterlinked contractsand cost-sharingarrangements are so commonmay be that they implicitlyprovidethe credit or insurancea tenant needs in an environment wherecredit and insurancemarketsare imperfect(Otsuka,Chumaand Hayami1992).The traditional interpretation that these interlinkages are devicesused by landlordsto bring the second-best equilibrium closerto the first-bestoutcomeby increasingthe tenant's supplyof effort(Braverman and Stiglitz1982;Mitra 1983;Bravermanand Srinivasan1981)requiresstrong assumptions that are generallynot satisfiedin developing countries(Otsuka,Chuma,and Hayami1992). A tenantmay be able to meet only part of his (working)capitalrequirements in the credit marketbecauseof the limitedsuitability of unharvested crops as collateral- and at higher interestrates than the landlordwouldget by offeringland as collateral.The landlordis in a better positionthan other financialintermediaries to providea tenantwith implicitcredit and actuariallyfair insurancebecauseof economies of scope in supervision and informational advantages concerning the value of the tenant's unharvested crop. Sincethe amountof credit providedwill be relatedto the tenant's expectedfuture income,the landlordcan set the contractual fixedpaymentto zero and stfllbe free to adjustthe interestrate, or acceptthe customaryinterestrate and adjustthe fixedpaymentand share parameter,to realizean optimaloutcome(Otsuka,Chuma,and Hayami1992). A popularform of implicitcredit is the landlord'sprovisionof inputsto the tenantunder a cost-sharig arrangement.Providinginputsthis way is formallyIdentical to an implicitproduction loan which, like interlinkedcontracts, wouldbe adoptedwherecredit marketsare imperfect.Static analysisof costsharing a em may thus be inpropriate if credit constraintsare to be taken filly into account.Calculating the implicitinterestrate charged for such productionloans wouldhelp determinethe equity and efficiency consequences of share-cropping arrangements. Tbe few empirical studiesthat have been done suggestthat the interestrates may not be significandy differentfrom those chargedby moneylenders, rates reachingas high as 50 percent(Fujimoto1986)or even more (Morookaand Hayami 1986). Wherethere are imperfections in credit markets, it is possibleto derive the preciseconditionsfor share contractsunder whichthe benefitsfrom overcomingthe credit

58

marketImperfections wouldbe greaterthan the loss resultingfrom the Marshallianinefficiency (Shaban1991). If tenantsare assumedto be willingto bear greater risk as their wealthrises (decreasing absoluterisk aversion)then both workingcapitalconstraintwith imperfectcredit marketsand risk aversionby tenantswouldgenerateobservationally equivalent outcomes.For a sampleof Tunisian farmers,Laffontand Matoussi(1988)foundthat a credit constraintrather than risk aversionled farmersto prefer share over fixed-rentcontracts.Sincecredit and insuranceare at least partly substitutable, it is likelythat improvements in financial marketsand in the insurability of risk will lead to a decreasein share contractsin favor of fixedrent contracts.Sucha shift shouldresult in a gain in overallefficiency sincefixed-rentcontractshave superiorincentiveproperties. None of the land rental modelsdiscussed here, or even Marxian-inspired modelsof semifeudalism (Bhaduri's1986)considersthe tenant's reservation utility - usuallythe marketwage to

be endogenously determined.Insteadthey explaininefficiency and inequitiesas consequences of the

contractsthemselves,despitethe fact that such contractsare enteredvoluntarily by both parties (see epilogue). But in light of the discussionin section2, it wouldbe surprisingindeedif landlordswith some politicalpower did not try to find waysto reducethe reservationutilityof potentialtenantsand workers. Governments the worldover have been concernedaboutthe efficiency and distributional implications of such tenancyarrangements, whichin essencedependon the relativebargaining power of each of the contractig partners. Tenancyand sharecropping have thereforebeen heavily regulated.The empiricalevidencesuggeststhat government interventions into these have had little successin achievingtheir stated objective of protecting tenants, whichis hardlysurprisinggiventhe market imperfections leadingto the emergenceof share tenancy,and the designdifficulty to welfareimprovinginterventons. Historically, land reformthat resultedin establishing owner-operated farms appearsto have been a far more successfulway of addressing the equity question. Evidence on efflidency of tenancy arrangenents

59

and draft animalswere significantly lower on sharecropped plots than on ownedparcels. No statistically significant differences in efficiency were found betweenownedplots and plots rented on a fixed-rentbasis, supporting the hypothesis of the productiveefficiency of fixed-rentcontracts.Other resultspoint in the same direction(Sen 1981),and Otsukaand Hayaml's (1988)reviewof the literaturefinds, at most, small efficiency lossesassociatedwithtenancy. Government interventions have givenrise to efficiency-reducing share contractsin a numberof countries.Otsuka,Chuma,and Hayami(1992)arguethat in India, wherethe Belland Shabanstudieswere conducted, there were a numberof government constraints on long-termfixed rent contracts.That impliesthat the 16 percentin productionlosses adjustedfor land qualityderived by Shabanare likelyto constitutean upper bound. L transactions to circumventimperfections in credit marketshave been importantin

WestAfrica in the past (Robertson1985),and continueto be observedin a numberof developing countrieswherecredit marketsare absentor credit is highly rationed.Usufructmortgageis still reportedto be commonin Bangladesh (Cain 1981),Java (Morookaand Hayami1986),and Tbailand (Fujimoto1988).In the Philippines, tenancytransactions emergedas a credit substitutein responseto limitations on the transferability of land (Nagarajan and associates,1991). Wherethere is imperfectinformation, on tenant' unobservable characterisics,landlords may inpret the tenants' acceptance of certin types of contractsas a signal that can be used as a self- selecing screeningdevice(Newberryand Stiglitz1979). The preferencefor tenantswho already possesssome land and draft animals,whichis well documented in the literature(Quibriaand Rashid 1986;Shaban1991)pointsin the samedirecdon. Tenancyhas often been describedas a rung on the 'agriculturalladder' that rises from workerto share tenant, to fixedrate tenant, to ownerand permitsfarmersto acquirecapitaland griculturalknowledge.In a static firamework this has been modeledby makingproductiona fimction of tenats' effortand the landlord'sprovisionof management skills (Eswaranand Kotwal1985). Aldtoughquantitative evidenceis limited,Reid (1973)arguesthat this functionof tenancyplayedan importantrole in the U.S. South afterthe abolitionof slavery.Lehman(1986)notedthe importance of tency in facilitatingcapitalaccumulation in the intergenerational transfer of farm holdingsin 61

Ecuador.Tenancywouldbe expectedto facilitatecapitalaccumulation where land is abundantrelative to labor and where rents or owners' shares are low. Longitudinal studiesof changesin tenancy pans and capitalaccumulation over the life cycle of tenantswouldhelp shed morelight on the relativeimportanceof this phenomenon in differentenvironments. Condusion Becauseof the productivityadvantage of small over large farms, it is moreprofitablefor large landownersto rent out land under fixed-rent contractsthan to work it using hired labor, if marketsand informationare perfect. If effortis unobservable and credit is rationedor insurance marketsare imperfectand tenantsrisk averse, the first best fixed-ratetenancycontractmay no longer be attainableand a second-best share contractwouldbe adoptedinstead. Empiricalinvestigations showthat share tenancyarrangements under a wide varietyof conditionsare a highly flexibletool for adjusting to such constraintswith relativelymodestlosses. Since effortis not fully enforceable and even limitedenforcement is likelyto be associatedwith some cost, the adoptionof share tenancy(or wage labor)contractswouldstill be associatedwith some loss of efficiency. Removingthe conditions that prompt the emergenceof share tenancyare likelyto lead to modest efficiency gains and will be more effectivethan legal prohibitionof such contracts(see Part II). Greaterefficiency gains may be associatedwith the removalof the distortionsthat lead to the adoptionand perpetation of wage labor contracts,and large commercial farms rather than fixed-rent or share contracts.

PART m: LAND POUCY

Many institutional arrangements in land marketsemergeas a resultof attemptsby the contractingpartiesto overcomeproblemsof asymmetric information, moral hazard, and covarianceof risk. Other types of institutionalaangements representinterventions by the governmentor communityintendedto produceoutcomesthat are more congruentwith the society'sobjectivesthan those that wouldbe generatedby marketforcesalone. Here, we wI define efficiency and equity as the main objectivesunderlyingintventions in land markets,althoughequity can be considereda tool 62

socialtensions.The two objectivesare objectiveof minimizing the more encompassing for achieving that facilitategreater equitywould reduce not alwayscompatible;in some situationsinterventions and vice versa. But not always. efficiency, and productionrelationsremaintoday (figure 1), Four broad types of land distribution policy problems. Familyfarm systemsunder freeholdor communal each with its own characteristic tenure face problemsof accessto credit, land registrationand titling, tenancyregulation, tenure prevailsface decisionsabout in whichcommunal and taxation.Communities fragmentation, farms coexistwith low wages commercial allowingsales to outsiders.Wherelarge scalemechanized of tenancy have to considerways,such as the elimination governments and unemployment, subsidiesand/or land reform,to make farm size of agricultural regulation,the elimination objectives.In wageplantationsystems, with equityand efficiency more compatible distributions contractfarmingand taxationare the importantissues.For collectiveand state farms systemsthe key farms shouldaim to establishlarge commercial or privatization concernis whetherdecollectivization or smallfamilyfarms.

7. Landregistration and titling The issues and thus information Land dtles an registation reducethe problemsof asymmetric by providethe instittional frameworkto facilitateland sales. Suchtransferscan enhanceefficiency transferringland from bad managersto better farmersand by facilitatingthe use of land as collateral in the credit market. Transfersof land, whichare facilitatedby land tides may negativelyimpact of land distortionsencouragesaccumulation if economicand insdtutional equityas well as efficiency of land tidiesis not costless, and maintenance As establishment or wealthyindividuals. by influential of the benefitsof land tites over and whetherto introducetitdinghas to be based on a comparison and the likelycost of such arrgemes. to regulateland transactions aboveexistng arrangements transactionsin land take place mainlyamong In the early stagesof agriculturaldevelopment, and who generallyshare informationaboutthe individualswho are membersof the samecommunity 63

rights enjoyedby a renter or a seller, and aboutrights to specifictracts of land. With more advanced agricultureand increasedmobility,communalconstraintson sales to outsidersare abandonedand transactionsare increasinglywith individuals who are not membersof the samecommunity.The scope for asymmetric informationincreases,generating inefficiencies in the land market since the price of land may no longer reflectits true social valueand the extentof land transactionsbecomes less than optimal.To reducethese informational inefficiencies and the associatedwelfarelosses, societiesdevelopinstitutional arrangements to reducerisk, such as the requirementin the Arthsastra (4th CenturyB.C. in India)that land transactions be conductedin public with witnessesor the establishment of a centralized public registerthat tracks land plots and those who have rightsover these plots. As early as 600 B.C., the Bibledescribesa land transactionbetweenthe prophet Jeremiahand a relative in whicha writtenrecord of the transactionwas kept in two copies with a certainpriest in Jerusalem. Public registersprovidepotentialbuyersor renters of land with a wayto verify that the rightsthey are aboutto purchasebelongto the seller. A functioning legal systemand effective enforcementmechanisms are other institutional arrangements designedto reducethe uncertainty relatedto land transactions.Withoutsuch arrangements to reducethe risk of challenges to land rights, the incentives to investand to workhard are weakened.It is often more efficient to reducethe risk through the provisionof public goods (and records, police,judiciary),than trough the private individualallocationof resources(guards,elaboratefences).2 Asymmetric Information and risk are at their extremesin frontierareas, wherespecific plots have no previousowners,thoughthe government usually claimsformalownership.While often the land is subjectto a generalclaimby trbal groups who have been using it for hunting,gathering, horticultureor livestockgrazing, some of it is also claimedby individuals who have migratedfrom other areas. Sincethere Is no culturallyunifiedcommunity from whichto ubtain knowledge,the administrativeinfrastructureOandrecord, offices,courts, police) typicallybecomesoverloadedby claimsand counterclaims. It is not uncommon then to find private(and necessarilysegmented) institutions protectingpropertyrightsover land (gunmen,fortifiedproperty).And becausethe 2 In Ugand and COted'Ivoie, Ind privuiiaon significandy decreased rids and rdacon coss associated withtransferng lnd relt in inasd landtrasfr, a factorcommonly associated withhigher productivity in agrculture (Barrows andRoth 1990;Atwood 1990).
64

Institutions for recordingpropertyare not well developed,land claimsbased on forest clearingcan leadto excessive deforestation (Southgate,Sierraand Brown 1991). for land recordsand title documentsalso have beneficial Institutional arrangements implications for credit markets.In lending,asymmetric information providesamplescope for moral the efficiency lossesassociatedwith hazard. Collateralhas long servedas a meansof minimizing asymmetric informationand moralhazare nndland has traditionally been viewedas an ideal collateralasset in areas whereland is scarce (Binswanger and Rosenzweig1986).For land to be usefulas collateral,however,the lender needsto be assuredthat the borrower-operator has the right to disposeof the land by sale or the transferof use rights.Thus the documentation of land rights of lendersto makeloans and may makesland a form of crediblecollateral,affectsthe willingness make credit marketsmore efficient(Feder,Onchan,and Raparla, 1988).Wherethe inabilityto use untited land as collateralfor credit is the relevantconstraint,the issuanceof titles can providea such as smallfarm size prevent the operationof a solutionin the long term. Butother constraints are not removed(Atwood1990). credit markets,land titles may fail to be usefuluntilthese obstacles Under ideal conditions government intervention in land registrationis theoretically of land neutralin its effecton equity.In practice,however,titlingc3nlead to greater concentration and to the dispossession of groupsthat have enjoyedland rightsunder a customarysystemthat predatedthe formalsystem.When titlingis introduced,wealthierand beter connectedindividuals have to claimland over whichother, less informed,individuals may use their informationadvantages advantages, titling based on the on-demand customaryrights. Even when there are no information principleinvolvesfixedand relativelyhigh transacton costs for surveysand bureaucraticprocessing impactsof titing on this basis are wellThe equity-reducing that put smallholdersat a disadvantage. the emergencyof haciendas known.The introduction of selectivedtlingon demandgreatlyfacilitated in CentralLuzon (Hayamiand Kikuchi1984),Guatemala(Cambranes1985),El Salvador(LindoFuentes 1990),and Nicaragua(Newson1987).In Boliviaduringthe 1980s,the tiding agencygranted titles to very large farms in the EasternLowlandswithinone to two years, whileapplications from smallbolderswithoutthe benefitof helpfullawyershave an averageprocessing time of 12 years. Bruce (1988)notes that land grabbingby influentialindividuals duringtiding programswho are able to use the rules in their favor did more to facilitateland concentration than transactionsin the land market followingthe issuanceof tides. The profitability of consolidating severalsmall untitled 65

to buy out smalholders holdingsand geting a singletitle providesincentivesfor w'althy individuals and to concentrate their own holdings. Titled land also providesadvantages in the credit market (Feder, Onchanand Raparla 1988)that are likelyto increaseincomedisparity. The policy implications by publicity To avoidtheseundesirableeffects,titlingprogramsshouldbe accompanied to ensure widespread lnowledgeof the rules and procedures.Both equity and efficiency campaigns rather than on demand.Efficiency is considerations argue that titling programsby systematic increasedthrougheconomies of scale and equityby the fact that all claimsin an area are registeredat the sametime. The ryorwari sys. a introduced by the BritishsystemIn SouthernIndia around 1820 claimscan be dealt with and similarsystematicttling progrmnselsewhereshow that conflicting dhrougha relativelyquickadministativeprocedurerather than throughlengthyand costlylegal channels. Becausedtling programscan be expensive,the issue of optimalexpenditureis relevant that when individual (see Malikand Schwab1991).Feder and Feeny (1992)have demonstrated there may be a tendencyfor the aggregatepublic expenditure, determines wilingness to pay for tidtling over-investment from a socialwdfare perspective.Frequenty, some less costlyarrangementthan In Rwanda,the local of information. lessenthe problemof asymmetry foral titling may significantly over specific that attestto he ownershiprightsof specificindividuals issuesaffidavits municipality tracts of land but are not based on precisesurveys(Blareland associates1992). A lower cost system et. al. 1990, Feeney was also used in Thailandprior to the inrduction of formaldtling (Siamwalla 1988). Communal systemsconstitutea specialcase. Communal land is not consideredadequate collateralIn formalcredit systemsbecauseof constraintson sales to outsiders.Issuing individual titles in communities that maintainsuch constraintsmay improveneitherthe securityif tenure nor access to credit, althoughindibual tides wouldbe helpfulto avoidbarriersto the emergenceof rental markets within the community.Untilthe restrictionson trnsfers to outsidersare eliminated,a community tle could be issuedto ensure the community's securityof ownershipagainstwell-connected outsiders. Paeu (1992)advocatesregisteringland as corporateproperty as a wa, of decreasingthe costs
04.!

associatedwith tiding whilereapingmanyrelated benefitssuch as insurance,flexibility of land allocation,and the utilization of genuinescaleeconomies in subsidiaryactivities.Experiencewith group ranchesin Kenyasuggeststhat imposinggroup titles from aboveis unlikelyto be successful while issuingindividual tides doesnot preventfarmersfrom taking advantage of scale wherethey exist (Grandin1989). Anothercase for community titles concernscommonpropertyresources,such as communal pastures, forests,or other marginallands. Such areasconstitutean importantsafetynet for the poor that may be particularlyimportantin high-riskenvironments wherealternative means of insuranceare unavailable.Community mechanisms for managingcommonproperty resourceshave tendedto weakenwith economicdevelopment (Lawry 1991;Jodha 1986and 1990), and privatization of such resourcesin India has led to significant increasesin yields.But the preservationof common propertyresourcescouldbe desirablefrom an equityperspective since privatizingtheselands takes awaya part of the social safetynet for the rural poor. Providinga community tidtle for these lands can protect communal rights from outsideencroachment and preventthe poor from beingexcludedfrom communal property.We need to learn more aboutthe management and the relativeimportanceof such areas to specificsocial groups. Assessments of the impactof individual titlingon efficiency vary. Atwoodemphasizes that in a distortedenvironment, introduction of land titles may decreaseequityand efficiency.Feder, Onchan,and Raparla(1988)findthat in Thailand,wherepossession of a tide can be considered exogenous' output is 14 to 25 percenthigher on titled land than on untitledland of equal quality. The marketvalue is also muchhigherfor tidtled land than for untitledland of similar quality.Less rigorous evidenceis providedfor CostaRica by Sals and associates (1970),who estimatea positive correlationof .53 betweenfarm incomeand title security.Studiesin Braziland Ecuadoralso suggest a positiveassociation betweenfarm incomeand tidtles (IDB 1986).But severalstudieshave demonstrated that the credit marketadvantages of titles accountfor the lion's share of their effects and that ownershipsecuritydoes not significantly affectdemandfor tiding (Adhollaand associated 1991).rTtlingmay have no significant effectat all whenlegal or customaryrules limit land

> If thedecision to acquire titleis endogenous, estimation of theeffectsof tiling usingcrosssectiol da is subject to simultaneity bias(Boldt1989; Stanfield 1990).

67

asactions and credit marketsare weak. In Latin Americawhere credit marketsare more devdoped, recentland dding programsappeargenerallyto have led to increasesin the value of land, without encouraging increasedconcentration - at least in the short term - (Stanfield1990).

68

8. LandTax The issues In most developing countries,land taxeshave evolvedfrom tributepaymentsto feudal lords or to a colonizing power. Becausethe taxeswent to centralgovernment budgets,local willingness to pay dependedon strong enforcement by tax collectors,who shared in the revenues. Inflationand the difficulty of centralized collectioneventually led to the erosionor complete disappearance of such taxes. Today,the policyquestionis whetherto reinstateland taxes and, perhaps to use themto financeinvestments and servicedin localjurisdictions,as is done successfully in the United States.In theory, a tax on land has three main advantages over a tax on agricultural outputor exports:(1) if a land tax is based on the potentialmonetaryyield of a certainplot under normalconditions,a land tax has minimaldisincentive effects;(2) it facilitatestaxationof the domesticagriculturalsectorwhilebeingmuchless regressivethan poll taxes; and (3) if the tax basis is changedinfrequendy,a land tax doesnot discourageinvestment in land improvements. If risk is high and insurancemarketsare unavailable or imperfect,introducing a significant land tax (basedon averageincomes)can lead to increasingland concentration as Hamid (1983)has shownfor India. Under these conditions,a tax based on actualoutput, whichacts as an insurancemechanismin the same wayas sharecropping does, mightbe preferableto a lump-sum tax on land (Hoff 1991).It can be shown,however,that for realisticvaluesof risk aversion,income variation,and exporttaxes, producerswouldprefer a land tax, balancedby an equivalent reductionof exporttaxes (Skinner1991).
Administering a tax on land effectively and equitablyrequireshavingan officialrecord,

or cadastre,of the size, value, and ownershipstatusof eachtract of land, its productivecapacityand information on the costsof outputsand inputs.Land tax administration also requiresa propertytax law that assignsproperty rightsand tax obligations and an administrative organization that keeps the registerup to date and assess, collects,and enforcesthe tax (Bird 1974).Even in the few developing countriesableto meet theseconditions,land taxes are relativelyunimportant, suggesting that the administrative or politicalcostsmay be higherthan the incentive advantages associatedwith a land
tax.

69

Progressiveland taxes are oftenadvocated as a meansof makingland speculationless attractiveand inducinglarge landowners to sell out or use their land more intensively (see Hayami, Quisumbing,and Adriano 1991on the Philippines). Landowners often findwaysaround such taxes, however,from establishing dummydivisionsof their holdingsto lobbyingfor exemptions from progressiverates associatedwith effectiveuse of the land (as in Brazil), whichsharplydiminishthe effectiveness of progressiveland taxes in breakingup large commercial farms. Suchan approachwas appliedand failed in Argentina,Bangladesh,Brazil,Colombia,and Jamaica(Strasma,Aism, and Woldstein1987;Bird 1974);Carter (1992)in a simulation model calibratedto Nicaraguafindsthat a progressiveland tax is unlikelyto significantly alter the distribution of land. And even if such taxes did work, it is not obviouswhy suchan indirectapproachwouldbe politicallymore acceptablethan direct redistribution of land. Progressive land taxesare also likelyto be associatedwith higher administrative costsand protractedlitigation. Plicy implications Wherethe administrative requirements - an up-to-datecadastreplus administrative organization - are lacking, flat or mildlyprogressiveland taxesbased on rough classification of holdingsmay still be useful for raising revenueand providingsomemodest incentives for ownersto sell off poorly utilizedland. The UnitedStateshas found successby assigning the administration of land taxesto local authoritiesand earmarkingtax revenuesfor local infrastructure and local governmentservices.By increasingthe localvisibilityof the benefitsfianced with the tax revenue, this approachmay increasewillingness to pay a land tax. It may also reduceadminisrativecosts since local governmens shouldbe better able to assessland valuesand land ownership.

9. Regulations

dmiting land sales

Governments and local authorities have often placedrestrictionson land transactions. Restrictionsare typicallyplacedon land sales and rentalswhen major changesare introducedto alter the land ownershippattern (redistnbutive land reform or settlingprograms).The restrictionsare designedto prevent an increasein the numberof landlessand in the social tensionsthat accompany landlessness.Since these restrictionsalso preventsometransfersof land from worse to better farmers 70

or managers,there is likelyto be some efficiency loss. Such restrictions are frequentlyevaded, however,throughdisguisedsales and rentls, whichare likelyto involvetransaction costs that constitutea loss to society. Restrictions on the rights of land reformbeneficiaries or settlerson state-owned land to sell the land also reducetheir accessto credit. Oftennew ownersare forbiddento mortgagetheir land during an initialprobationperiod. Sincethat periodcoincideswith the establishment phase,when their need for credit is most urgent, the efficiency lossesmay be considerable. Landrental contracts(usufructmortgaging and kasugpong contracts) that have arisenas credit substitutes,in some places, such as the Philippines(Nagarajan,Quisumbing and Otsuka1991)involveconsiderable efficiency losses. Sometimes restrictions on sales are not total, as in communal systemsthat permit sales only amongmembersof the community. The welfarelossesfrom the sales restrictions are less than in the case of a total ban, but they are not completely eliminated. In the early years after a redistributive land reform in areas whereland marketsare thin and accurateinformationmay not be available on the expectedstreamof incomesfrom the land, it may be reasonableto imposea temporaryrestrictionon sales of say, three to four years.That would allowsufficient time to acquirelnowledgeabouta farm's potentialand to avoidsales at prices below the real value of the land, whichwouldrun counterto efficiency and equityobjectves. Such restrictionswouldnot be needed,however,in areaswhere formertenantsreceive land they have been tilling sincethey can be assumedto have adequateknowledge of the land. In the case of partial restrictionsunder communal systems,the ban on sales to outsidersmay serve a protectiverole in environments whereoutsiderswith strong politicalconnections may attemptto take over land in the community.Whereappropriateinstitons for inragroup decNsion-making are available(Libecap 1986), permittingthe community to limit sales and givingit the right to decidewhetherto eventually allowsales tD outsidersmay be an acceptable compromise betweenequityand efficiency concerns(see Barrowsand Roth 1990).As traditionalsocialties loosenor the efficiency loss from the sales restrictionbecomestoo high, groups are likelyto allowsales to outsiders.The recentconstitutional reform of the land rightssystemIn Mexicoallowsfor free sales and rental withinall efidos and for decision-making by majorityvote on whetherto eliminatethe restrictionon sales to outsiders.

71

The most commonmeansof restrictingland sales are upper and lower bound size restrictionsand zoningregulations.Land ownershipceilingshave often been imposedin an attemptto break up large estatesor to preventtheir reconcentration. Amongcountriesthat have imposedceiling are Bangladesh (Abdullah1974), India(King 1977),Indonesia,Japan, Korea, Pakistan,South Vietnam,Taiwan,Egypt, Ethiopia,Iran, Iraq, Zimbabwe,Bolivia,Cuba, El Salvador,Guatemala, Mexico,and Peru. Whilesuch ceilingscan theoreticallyincreaseefficiency wherea negative relationship existsbetweensize an,. vroductivity, in practicethe ceilingshave been evadedthrough fictitious subdivisions or have becomesuperfluous over time through inheritance.Ceilingswere often commodity specificprovidingmuchlarger limitsfor sugarcane,bananasor livestockranching. Therefore, they encouraged inefficient conversion to productswith the highestceilings.Rarelydid ceilingsalone enablethe poor landlessor extremelysmallfarmersto vurchaseland; rather, they enabledfarmerswith medium-sized holdings,who had alreadyacquiredsome equity,to enlargetheir holdings(Chile). Despitethese flawsand loopholesin practice, severalstudiesdo credit land ownership ceilingswith a major role in preventingnew large consolidations after land reform (Cain 1981; Mahmood1990). In Japan and Korea,successin preventing the reaggregation of land may be attributedas muchto the availability of attractiveinvestment opportunities outside agricultureand to noneconomic factors sucLas attachment to land as to the ceilingson land holdings.Ceilingsimposed foLlowing a land reform that results in fairly homogenous holdingsmightbe effectiveand less disortionary in preventingmassivereconcentration of land. At the oppositeend, resricdons on minmwn holdingsize are intendedto prevent excessivefrgentation of farms. While it is not clear that fragmentation is alwaysa negative phenomenon (see below)a floor on farm size might providea usefulcountervailing effect in a society whereinheritancecustomslead to extremelysmall farms. Whetherthe intervention improves efficiency dependson the specificcircumstances. Also to be consideredis that many restrictionson subdivision of land or minimumholdingsize have historicallybeen used to prevent ex-slaves,tenants, andother powerlessgroups from acquiringownershiprightsto land and thus eventuallycompeting with fanm established by the rling group. Restrictionson the subdivisions of large farms in Kenya and Zimbabwehave limitedthe prospectsfor land resettlementschemes(Leys 1974)and in these circumstancs clearly reducedefficiency. 72

Governments often adoptzoningregulations,.e. assignspecificuses to certain lands to overcomeenvironmental externalitiesrather than allowingmarketforcesto determineland usage.In urban areas, the objectiveof zoning is to preventcommerciaor industrialactivitiesfrom locatingin residentialareas and creatingnoise andpollution.In rural areas zoningof land for agriculturaluse providesbenefitssuch as tax credits, exemption from assessments for urban type services, eligibility for soil conservation programs,and proteceion from nuisancesuits, but foreclosesthe optionof selling the land as a residentialproperty.? In general, zoningisjustifiedif negativeexternalities need to be reducedby more than the cost of zoningenforcement. Zoning laws established for social or environmental reasonsmay run counterto economicincentives.Zoning may then need to be supportedby some type of incentivemechanism, and politicalsupportfor implementation of the regulations becomesessentialto their enforcement (Barrowsand Neuman1990).If there are sharp conflictsbetweenprivateprofitability of land uses and zoningregulationsin a countrywith weak institutional infrastructure, and little popularsupport for the zoningmeasures,zoningmay lead to excessive rent-seeking and corruption.If zoningresults in the emergence of extensiverent-seeking the benefitsmay greatlydecreaseor even becomenegative (Mills 1989).Zoning laws affectsupplyand demandfor land and may lead to consumermobilityin responseto zoning Mfebouteffects).The attemptto counteract productionor agglomeration externalitiesthroughzoninglaws also generatesthe potentialfor rent seekingbehaviorby landowners who either try to evadeexistingzoningregulations or lobbyfor the imposition of a set of lawswhich wouldprovidethem with a differential advantage.All of these issueshavebeen analyzedlargelyin isolationof each other and a comprehensive analyticaltreatmentis not yet available (Pogodzinsi and Sass 1990).

X Hmabeny and Barrows(1990)find that parcel caterics in geneal ddemine whvetr agicultusb zoni haspositiveor neptive pnce effects,in paicular parcl i and ditance fromurban areas.(For a toviewof theeffectsof urbanizaioD on agnculture, sweBhadra andBrmndao 1992.)

73

10. Fragmentation and consolidatlon The Issues Whilegovernments ofteninterveneto preventfragmentation of farm land, such intervention is not alwayseconomically justified.Tbat requiresthat inheritancecustomsor other exogenous forcesbe responsiblefor most of the fragmentation, that losses from fragmentation be substantial,and that existingmarketsbe unableto counterfragmentation. While inheritance customsprobablyexplainmuch of the fragmentation ^f.arm land, it may also reflectconsciousdecisionsby farmersseekingto reducetheir risk by diversifying their farm land and thustheir crops (McCloskey 1975).'Ibis factor is likelyto be importantwhereother riskdiffusionmechanisms such as insurance,storage,or credit are unavailable or are associatedwith higher coststhan fragmentation. Fragmentation may also help to smoothout labor requirements over time wherelabor requirements are highly seasonal(Fenoaltea1976). Amongthe disadvantages associatedwith fragmentation are physicalproblems(increased labor time, land loss, need for fencing,transportation costs, and limitations to access);operational difficulties(unsuitability of certain equipment, greater difficulty with pest controland management and supervision,foregoneimprovements such as irrigation,drainage,and soil conservation); and social externalities(needfor extensiveroad and irrigationnetworks;Simons1987).The few studies whichquantifylossesfom fragmentation developing countriessuggestthat the lossesinvolvedare modest,althoughfurther studiesof the efflciency of farms or lossesfrom fragmentation are clearly needed.Indeed, Hestonand Kumarclaimthat in Asia *it is hard to findinstanceswhere fragmentation had involvedhigh lossesin output' (1983:211),and in Ghanaand Rwanda,Blarel and associates(1992)findfragmentation does not seem to hurt productivityand does improverisk diversification and the allocationof familylabor over time. Policy impllcatIons Relyingon the marketto eliminate tation is liklcyto involvehigh transaction

costs to coordinte transfersamonglarge mumbers of landowers. Transactioncosts are muchlower 74

under goveramentprograms,whichare normallycoerciveand includea range of other development initiatives,and returnscan be high - Simons(1987)findsreturns of 40 percent for France. However, if the forcesthat led to fragmentation remainunchanged,land consolidation programsare unlikelyto have any long-termeffect (Simons1987;Elder 1962). Whenshouldsomething be done aboutfragmentation? Experiencein industrialized countriesshowsthat fragmentation becomesa seriousconstraintrequiringintervention once it impedes the abilityto use machineryon a large scale in areas with a rapidlydecreasingagricultural population (Bentley1987).This is rarely the case in developing countries,with their high population densities.In addition,consolidation programsare likelyto take a long time to complete,and they require considerable human capitaland well-developed cadastresand land titles. Immediategovernment action to consolidate holdingsdoes not appearto be a high priorityin most developing countries,considering the high costs and the potentialreductionof interestin fragmentation as rural credit and insurance marketsimprove.

11. Restrictionson land rentals The !ssues Governments have often introduced tenuresecurhyand rent controllegisladonto protect tenantsfrom arbitraryevictionor to limit the amountof rent landlordscan changc.The unintended result has often been the evictionof tenantsat the first hint of suchlegislationand the landlords' resumptionof self-cultivation on the home farm, resultingeventuallyin the formationof Junker estates.In India, atempts to pwvide greater land securityfor tenantscouldbe enforcedonly in stes that imposedland ownershipceilings(King 1977), and even there, landlordsfoundwaysto evadethe legislationby signingtenantsto short-termcontractswhichwere exemptfrom protection,or by rotatingtenantsfrom plot to plot. Whererent controlshave been effectively implemented and combinedwith protection from evictionas in the Philippinesor Taiwan,they do increasetenants' income,but sincethere Is no transferof ownership,they are still likelyto resultin dynamicefficiency losses. In the longerterm, 75

find waysto circumventthe restrictionon rents, such policiesare likelyto reduce unless landowners in lossesfrom constraintson adjustments incendvesfor rentingout land, resultingin efficiency is also likelyto fall on farms on whichtenantshave a protected operationalfarm sizes. Investment statussince landlordsare unlikelyto investheavilyin land from whichthey are preventedfrom to investare weakenedby uncertaintyaboutthe inheritability evictingtenantswhile tenants' incentives of the protectedstatus. on the landlord'sshare are widespreadeven Bans on sharetenancyor low ceUings whereother forms of land rental are allowed,such as the Philippines(Otsuka,Chuma and Hayami (Palmer1979), South Africa (Bundy1985), 1992), Brazil (Estatutada Tierra 1964),Zimbabwe are motivatedin part by the common Honduras,and Nicaragua(Dorner 1992).These restrictions of land scarcity,tenantsare likely under conditions (because, belief that share tenancyis exploitative wage)and in part by effortsto eliminatethe Marshallian to receive incomescloseto their reservation and if share associatedwith share contracts.But if the choiceof contractis endogenous inefficiency of credit constraintsand high risk and gains under circumstances contractsprovideefficiency the underlyingframeworkof costs, simplyprohibitingshare contractswithoutchanging supervision (Otsukaand Hayami1988). is likelyto result in very slightgains in efficiency market imperfections More likely,the bans will be ignored,givingwayto disguisedtransactionsor less efficientwage Tenancyhas long been an important labor contracs that improveneitherequity nor efficiency. capitaland gain agriculural experience,so transitionalstageallowingpeasantsto accumulate as a rungon the agrarianladder will certainlynot contributeto equityin of sharecropping elimination in productionmay be associatedwith the absenceof inefficiency the long run. And considerable as an option, especiallywhererestrictionson privateownershipof land impedethe sharecropping lossesof of fixed-rentmarkets(Noronha1985).Collier (1989)estimatesstatic efficiency functioning of share contractsin Kenya. From al more than ten percent associatedwith unavailability andlow ceilingon landlord'sshare have no merit. perspectivesthen, bans on sharecropping

76

12. Redlstributive land reform The Issues Most redistributive land reform is motivated by public concernaboutthe rising tensions broughtaboutby an unequalland distribution. The commonpattern is concentration of landownership amongrelativelyfew large owners in an economy wherelabor is abundant and land is scarce. Thus the massesof landlesslaborersand tenantswho derive their livelihoods from agriculturereceive relativelyless incomebecausetheir only asset is labor. Redistributive land reform can also increase efficiency, by transferringland from less productivelarge units to moreproductivesmall, familybased units (section4).X6 Yet, becauseof other marketimperfection, land marketswill not typically effectsuch transformations of ownershippatterns.The valueof the land to large ownersmay exceed the discounted sum of agricultural incomesmallholders can expectto receivedespitetheir productivity advantages from lower supervision costs if there are policydistortionsfavoringlarge ownersor if the accessof small farmersto long-termcredit haz alreadybeen exhaustedby mortgage-based land acquisition. Marketvaluesof land are determined in a waythat preventssmallfarmerswho lack equity from buildingup viablefarms and improving their standardof living whilerepayingtheir land mortgage.Land reform schemesthat requirepayment of the full marketvalueof the land are likelyto fall unless specialarrangements are made. In the simplestcase, beneficiaries soon defaultand the program ends. Many ambitiousland reformprogramssimplyrun out of steam becausefull compensation of old owners at marketprices imposesfiscalrequirements that the politicalforcesare unwillingto meet - that was the fate of programsin Brazil, the Philippines, and Venezuela.Some programsattemptto avoidthis problemby compensating landowners (with bonds)whosereal value erodesover time. Not surprisingly,landowners opposethis thinly disguisedconfiscation, and such programsare politicallyfeasibleonly in circumstances of politicalupheaval(Cuba,Japan, Korea, Taiwanor Vietnam).Anotherapproachis to financeland purchasesthroughforeign grantsor from intal tax revenuesor inflationary monetaryexpansion - or some combination.

X Undercircuma of extem poverty andlsndo redistribution of landcanalsoenhance efficiency by iprovng t nutnritional wllbeig andthustheproductve capacity of the population (Dasgupta andRay 1986and 1987,Mon. 1992).

77

Polley implications Before any land redistribution programis ihtroduced,the implicitand explicitdistortions whichdrive land prices abovethe capitalized value of agriculturalprofitsneed to be eliminated. Otherwise,small farmerswill continueto have an incentiveto sell out to larger farmerssince the eavironment would still favor large ownershipholdings.In Brazil, the emergenceof an agricultural structuredominatedby large farms owes muchto the policybias in favor of large farms (Binswanger 1987). The poor must be providedwith either the land or a grant to help them buy it to compensate for their lack of equity. Credit to beneficiaries for land purchasescan only play a subsidiaryrole."' The macro-economic and politicalenvironment also stronglyaffect the outcomeof land reform policies.In Chile, substantial increasesin outputfollowedthe expropriation and redistribution of almost20 percentof the total agricultural land in 1964-70,muchof it due to the increasein investment inducedby the favorablemacroeconomic and politicalconditions(Jarvis 1985, 1989).In contrast, outputfailed to increasesignificantly duringthe decollectivization and breakupirzo fawrily farms in 1975-83,a periodof extremely unfavorable government policies.Not until some of the debts incurred to pay for the land had been forgivenand structuralimpediments affectingsmall farmershad been eliminateddid the programbecomefully effective.Removingdistortionsalso lowersthe amount of grant assistanceneededby smallfarmersto supporttheir acquisition of land. The type of manorialestate has a substantial bearingon the gains to be expectedfrom land reform. On landlordestates,would-bebeneficiaries are alreadymanagingoperationalunits so land reform addressesprimarilythe equity concernsof society,transferringthe entidtlement to land rents whileleavingoperationalfarm structurelargelyunchanged.Potentialefficiency gains are associatedwith improvedinvestment incentives and increasedsecurityof tenure (section3). With haciendas,the threat of land reform legislationoftenleads to the evictionof tenantsand reductionsin the residentwork force. The large commercial farms that result are more difficultto subdividethan landlord estatesor haciendas(de Janvry 1981, Castllo and Lehman 1983;de Janvryand Sadoulet

whichar forgivenas pat of thedea.

7 Organizations suchas thePennyFoundation is Guatemaa have beenableto buy landfrom owners and distbuteit to smallfaer.v with itle appan government subsidies (Foer 1992). These ca usually mvolve mome grnt elemet or subidy thecredit provnded to thesmallholders, or thepurchase of theland belowmarket priceson accountof liabilities of thefomr ownr to govenmentinsituion or theworers
78

farms involvemajor changesin the 1989).Land reformsof Junkerestatesand large mechanized organization of production.The residentlaborforce and externalworkershave little or no in nor the investments independent farmingexperience,and in manycases, neitherthe infrastructure physicalcapitalprovidean appropriate basis for smallholdercultivation. inputand outputmarketsthus becomes and of competitive The availability of technology Appropriateinstitutional a crucialdeterminant for the potentialof land reform to increaseefficiency. arrangements are neededto ensureaccessto extensionservices,credit, and markets. Suchinstitutions on former Junkerestates are especiallyimportantwhereland reform involvesresettlingbeneficiaries gains of familyfarmingunder these commercial farms. To reap the efficiency or large mechanized conditionsseemsto requireincreasingthe densityof familylabor, and that may requireresetding landlessworkersfrom outside.2Reformof thesesystemsis likelyto be difficult,but wherethe of large economicand socialcosts, includingthe possibility alternativeto reform is the perpetuation of revolt and civil war, the cost of failingto reform may be enormous. reformof wageplantationsin the classic Opinionsare dividedon redistributive plantationcrops: banana,sugar, tea and oil palm. The fact that contractfarmingin these plantation worldindicatesthat convertng in manyparts of the developing crops is practicedsuccessfully and Adrianodescribethe plantationsto contractfarmingis feasible.Indeed,Hayami,Quisumbing, of even a bananaplantationinto a contractfarmingsystemin the Philippines, successfil conversion and stronglyargue for bringingaboutmore such conversations through a progressiveland tax. The costs associatedwith such a step are likelyto be offset, efficiency gains from lower supervision crops. of scale in plantation however,becauseof the genuineeconomies rather than contractfarminghas been with collectives Tryig to replaceplantations unsuccessful. In Peru, the failureof collectivized sugar plantations to investand their increased esploitationof externalworkerswho were deniedmembership rights led to strikesby collective membersthat were put downby militaryintervention. Continuinglosses- in part due to fallingworld

X To oomm extent,creditandotherpublicsupport can sbtute for theadvantage of mmily labor per difference in economic peformance between hocae Loys(1978) found forKenya that there ws8verylittle andlowdenst sms with arg plots andlowpublicinvestmen, highdensity hm, withsmalp!ots andsubal publc uppoft

79

sugar prices - provokedincreasedgovernment intervention and the effectivetransformation of the collectives into state farms (Kay 1952).In Malaysia rubberplantationswhichhad been establishedon a collectivebasis were split up and allocatedto individualfarmersat maturityto ensureproper tapping(Pickett 1988).

13. Decollectlvization The poor performance of collectives and state farms the world over is so obviousthat the questionfacing the liberalizing economies of EasternEurope and the Commonwealth of IndependentStatesis not whetherto privatizebut rather how quicldyand in what form - as large commercialfarms or familyfarms. Policy implications The discussiotns in this paper implythat four issuesappearto be of overriding importancein determining this policy choice:
*

The small farm option is viableonly if there are competitive inputand output markets. Otherwisethe land rent ai4 the entrepreneurial rents from agriculturewouldbe capturedby the monopolistic outputmarketersand inputsuppliersrather than by the new farm owners. Risk diffusionmechanismsalso need to be functioning adequatly else covariate weatheror price shockscan force distrescsales by newlandowners,who do not have other assets or income streams. Work on creatingcompetitiveinputand output marketingsystemsand a viable financialsystemthereforehas to start beforelarge farms are split up ino individual landhchlings. Experiencefrom China, Vietnam,and East Germanyshows that inputsand machineryservices, whichhave previouslybeen suppliedby the cooperative,are more efficiently providedby private contractorswho lease or buy the machinerystock from the cooperative in a competitive process (Nolan 1988, Pingaliand Xuan 1992, Pryor 1992).The Chineseexperiencealso suggeststhat farmersand machinerysuppliersrespondto the changesin operationalholding 80

size by adoptinga difference andgenerallymoreefficient pattern of mechanization (Ling 1991).TIhssuggeststhat tne excessivelumpiness of the existingmachinestock is not a serious constraintto smallerscale farming. Agriculture research, extension,and other productionsupportservicestake on special importance sincemany farm workersare likelyto lack the skills neededto managetheir own farms. Someof the structuresthat servedquasi-governmental functionson collectiveand state farms particularlyby providingeducationand healthservicescouldbe retainedas well.They might also eventually developinto independent cooperatives for supplyingmachinery,custwr plowingmachinerentalsor for inputsand possiblycredit - all in competition with the private sector (see Nolan 1988;Pryor 1992).
*

Wherecapitalskills, technology, infrastructure, or competitive marketsfor inputsand outputs are lacking, enthusiasm for independent farmingmay be lackingas well. If only a few entrepreneurs are willingto farm, the resultingfarms are then likelyto be too large for the cost advantage associatedwith the use of familylabor, and large commercialfarms, heavily mechanized or dependenton large numbersof hired workers,will emergein their stead. Most likelysuch large farms wouldcontinueto press for subsidies,emergeas rent-seekersfrom the rest of societyand, if successfiu,generateinsufficient employment. Therefore, countriesmay need to findtemporaryarrangements, including long-termland leases, that will providea greater numberof households with opporunitiesto acquirethe necessaryskills neededto allow the emergence of a structureof smallerfamilyfarms more consistent with the incomeand wage levels and rural labor forcesthat can be expected for theseeconomies in the next few decades.

EPILOGUE ON METHODOLOGY Scholarsof various ideological persuasiveness and methodological commitments have attemptedto explainthe great variationsin land relationsover spaceand over time whichhave been the topic of this paper. Much of the discordance amongthesescholarsis closelyassociatedwith their choiceof modelingstrategiesand assumptions.This epiloguerelatesthe analyticalresultsand the

81

observedvariationsin land relationsdiscussedin this paperto the minimumset of assumptions needed to derive the results or explainthe variations. We distinguishseverallevels of assumptions. Lewl A assumesse:.-mterested behavior,such as expectedutilitymaximization or other forms of purposivebehavior,of all actors, who competeon a level playingfieldin an environment with risk using voluntarytransactions,with symmetrically distributedinformation and exogenously givenendowments of land, capital, and skills. Technology is characterized by constantor diminishing returnsto scale. Virtuallynone of the variationsin land relationsdiscussedin this paper can be explainedwith these assumptions alone. Lewl B adds constraintsin the credit marketcr assumesthat marketis entirelyabsent. Formal modelsof surplus valuefrom Marx to the generalized versionof Roemer(1982)use this approachto explaincapitalistexploitation and the endogenous differentiation of maximizing individual economicagents - who operatein a competitive environment with voluntarytransactions- into economicclassesas the consequence of differences in their exogenous endowments of physicalcapital and absent credit markets. Eswaranand Kotwal(1985)applyRoemer'sapproachto agriculture, imposingin additionconstantcosts (section4). Lewl C adds asymmetricinformation, moralhazard, and incentiveproblems,arrivingat the analyticalapparatusof agencytheory.As Stiglitz(1986)summarizes,these assumptions are sufficient to explaincredit rationing,therebygiving an analyticalunderpinning to level B models. They also explainvarious combinations of reasonsfor sharecropping and interlinkedcredit (section 6). Ihese assumptions are also sufficient to establishthe superiorityof familyfarms, as discussedin the mathematical modelof Feder (section4 and appendix2) and the historicallywidespreaduse of teona by large owners of land at moderateto high population density to circumventthe diseconomy of rale (section2). Incentivesissuesof collectives are also analyzedwith this analyticalapparatus (section4). Level C modelsprovidelittle insightinto the processby whichlarge landownership holdingscould accumulate or be perpetuatedin systemscharacterized by voluntarytransactionsand competition,and with constantor diminishing returns.

82

LevelD addsseveralmaterialconditions relatingspecifically to agriculturalproduction, generating the analyticalapparatusused by Meillassoux (1981)or Binswanger, Rosenzweig, and McIntire(1986, 1987).The materialconditionsmost frequently used in this paper are covariance of risk and returns amongfarmersand workersin a givenagriculturalregion, the immobility of land, which- when it is scarce - makesit Into a preferredstore of wealth(relativeto stocksand livestock, for example)and of collateral,and exogenously givenpopulation densityand processing characteristics of specificagricultural commodities. Covariance createsenormousdifficulties for intertemporal marketsfor crop insurance and credit.Becauseof land's preferredrole as store of wealthand as collateral,an insuranceand collateralbenefitis associatedwith landownership. Togetherwith the failure of intertemporal markets this preferredrole explainsthe prevalenceof distresssales and the accumulation of large landownership holdingseven in a competitive environment with strictlyvoluntarycontractsand diseconomies of scale (section5). Ihe potentialfailureof land sales marketsto improveefficiency in an environment with missingor imperfectintertemporal marketsis a powerfuland historically relevantillustrationof the theoremof secondbest (Lipseyand Lancaster1957)of neoclassical economics. The explanation of variationsover time and spaceof propertyrightsto specificplots of with the land (sections1 and 2) requiresthe introduction of population densityand its association as explained by Boserup(1965).The seasonality of farmingsystemsand the farm technologies, production,the timelinessrequirements of specificcrops, and the economies of scaleof the processing plants or transport facilitiesrequiredfor them are necessarymaterialconditions to explain the survival,in only a few specificplantatio'% crops, of wage plantationsin the absenceof slaveryor indentured labor (section4). Note that anthropologists, like Marvin Harris, who use behavioraltheir detailedmaterialassumptions,althoughtheir materialistapproachesalso carefullyspecifying themesextendwell beyondthose discussedin this paper.
Level E partly abandons the assumption of voluntarycontracts(for the case of slavery

and bondage)and extendsthe analysisbeyondindividualistic approachesand transactions by introducing rent seeking,coalitionbuilding,and the coercivepowerof the state to enforcelaws. Ihese additions facilitatethe explanation of the use of bondageand slavery,tribute systems,state 83

allocations of preferentialland rights and enforcement powers to ruling groups, distortionsin commodity and fctor markets, and distortionsIn public expenditures specifically intendedto extract rent and make large ownershipor operational holdingscompetitive with independent familyfarms (section2 and 3). The historicalliteraturehas sharplydifferentiated betweencoerciveand noncoercive methodsof rent extractionand has often equatedthe elimination of coercivemeans with the leveling of the playingfield. Whilethere are certainlyimportantqualitative differences betweencoerciveand of rent seekingor noncoercivemeans, the differentiation seemsto have obscuredthe continuity surplus extractionalong alternative paths such as taxationof the free peasantsector, land allocation, monopolymarketing,and the allocationof public spending. Level E explainsthe emergenceand persistence over time of highlydualisticfarms size structuresas the result primarilyof a rarely broken chainof rent seeking(sections2 and 3). It explainsthe poor economicperformance of many suchsystemsas the result of a dissipationof rents into the cost of competition for them amongzent-seeking groups.20 Withinthe chain of rent-seeking, the officially sanctionedset of legitimateinstruments of rent seekingmay be progressivelyreducedby graduallyeliminatingslaveryand serfdom,tribute and corvde,and land rental, untilonly output and allocationof public expenditure remain. With exogenous factor marketdistortionsand differential variationin the set of instruments availablefor rent seeking,this frameworkof analysiscan explaina substantial proportionof the variationover space and time in the level of use of each of the available the income instruments.For given instruments,modelingat levelD can also, in principle, investigate distributions and efficiency costs associatedwith the resultingdistortions,whilethe theory of rent seekingbehavior(Tollison1982)can be used to investigate the extentto whichrents are dissipatedin the processof competingfor them.

reBner (1975,198S) arguestt underfaudalism therentsextmcted frompents by luoded eliteswere almost completely dissipated andthattho esult failure bypeasants andlandlords to rnvest in land imwovem anddrft animals wa responsible for theextension of arble farming to marginal landsandthe declining productivity asocited withpwuin gwth in feudl European aiulre. Thusit wasth nt oekigg itselfthatledto theNeo-Malthusian or Ricardian subsistenco cises of thetwelfth andthinteth positive Boserup-succes of investment, age in technique, centuries, daerthanto popuation-induced inresed divsionof labor,andagiculura productivity growth. Thisexplansion of sagnantor declining prductivityis smilar to tht documented by Kreger, Sdhiff, andValdes (1992) to explain trecet stgata of agrulture andlimited technical change in muchof Africa asa cosqun of theextrdinry high taxaionof (mostysmallholder) agriculte in my Africn countiesby urbn-domatd stes. 84

Finally,level F asks questionsthat are touchedon only lighdyin this paper aboutwhat for rent seekingor surplus available the changesin the set of instruments endogenously determines over space densityand its distribution extractionin a givencountryat a giventime. Population debatedissuesof the demise variable.The questionsincludethe extensively becomesand endogenous of feudalismand bondage(Marx;Dobb 1977;Brenner 1985);the abolitionof slavery (Fogeland of corvee,tribute, and debt peonage;the power Engerman1977;Meillassoux1991);the elimination of the land rental output and inputmarkets(Andersonand Hayami1986);elimination to monopolize option;and land reform (de Janvry 1981).The questionsanalyzedalso includewhy revolt and availableis revolutionare necessaryin some cases,while in othersa changein the set of instruments production by reform,and why somereformslead to stable and efficient accomplished successfully in either equityor efficiency. that are unsuccessful relations,while othersresult in institutions and Marxisthistorical These are the grand themesof historians,classicaleconomists, that, exceptin purely materialistanalysis.These issuesusuallyinvolvecoalitions(or their breakdown) trading, financial, rural groups to includemanufacturing, agrarian societies,extendbeyondopposing materialones) elements(including bureaucratic,or foreign interests.Thereforeadditionalexogenous framework.Muchof the workon these from outside agriculturemust be factoredinto the exploratory of aboutthe distribution themesthat we have comeacross neitherexplicidyspecifiesassumptions of agriculture information(level C) nor formallyincludesinto the analysisspecificmaterialconditions And whilerent seekingof level E is implicit in level D) or other sectorsof the economy. (introduced are discussed,the coalitionbuilding or their breakdown in the questionsasked, and coalitions associatedwith rent seekingis rarely modeledexplicitly.There may be some gains to be had from into the structureof the of theseomittedelementsand their incorporation more formal considerations andysis of these grand themes.

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Appendix 1 Interventions to Establish and Support Large Farms The literatureon emergenceand evolution of manorialestatesand the productionrelations prevailingwithinsuch estateshas focussedlargelyon examplesfrom Europe(mainlyBritain, France, Germany,and Eastern Europe).This appendix,whichexplainstable 1 in the text, providesevidence on the establishment and evolutionof large farm systemsfrom a wider rangeof setdngsand coversa longer time period. The examplesdiscussed here all suggestthat neitherthe establishment nor the continued existenceof large farms were due to their superioreconomicefficiency and/or the presenceof economies of scale in agricultural production.The establishment of large farms was due to governmentintervention in favor of large landholders via land grantsand differential taxation. Withdrawal of these privilegesled either to their disintegration into landlordestatesor to a shift towardsrent seekingand more subtleformsof supportfor large farms. Asia India (North) Landmarketinterventions. The haciendasystemis alreadydescribedin the Arthshastrafrom the 4th centuryBC. In the first century,land grantscomprisingsome ten or more villageseach were made to priests and to a few membersof the ruling familyand high officersof the state (Sharma 1965). This processof land grants 'culminatedin the 11thand 12thcenturies,when NorthernIndia was parcelledinto numerouspoliticalunits largelyheld by secularand religiousdoneeswho enjoyed the gift villagesas littlebetter than manors' (Sharma1965:273).

DifWerendal waton andlaborlevies.Corveelabor emergedin the secondcenturyand remainedprevalentuntil the tenth century.Betweenthe fifth and tenth centuries,wherepopulation densitywas high enough, as in Gujarat,Rajasstan,and Maharastra,permanenttenantswere reduced to tenantsat will. Wherepopulationdensitywas low, tenantsand artisanswere tied to the soil in the same manneras serfs in medievalEurope (Sharma1965).
China (South) Diferend tation andlaborkvies. The equitableland allotmentsystemintroduced around 600 under conditions of land abundanceallocatedland equallyamongall membersof the commTunity in return for tax payments.Slavesreceivedthe standardsize of plot but had to pay only half the taxes demandedfrom free men (Chao 1986).Peasants,however,couldnot escapethe tax burden since farmerswho fled to uncultivated lands were returnedto their villageby the authorities.DeFrancis (1956)quotesreportsof 600,000 "refugees havingbeen collectedin a singleyear (544). To escape the tax, manycultivators presentedthemselves as serfs or "bondservants" to large landholders or monasteries,leadingto the emergenceof large estates. In a majorland reform in 1369under the Mingdynasty,the estateswere brokenup into smallfreeholdfarms (Eastman1988).Followingthe land reform, tax captainswere installedto administer tax collectionfrom units of 110 households each and to delivergrain taxes to government warehouses. Using corveelabor and bondservants, they were also active in land clearingto expandtheir revenuebase (Shih 1992).They accumulated modest 86

estatesof their own thanksto their abilityto providecredit. Increasingly heavytax demands(to financewars)left manytax captainsin a desperatesituation. The newgentry class that began to emergein the fourteenthcenturywas exemptfrom both taxesand labor services. Sincegentry landlordsdid not pay taxes, they were ableto reap higher returs from land and accumulate wealth. They were able to further increasetheir holdingsafter periodsof disasterby foreclosingon lands they had acceptedas collateralfor credit (Shih 1992). These advantages made it easy for membersof the gentry to accumulate land, decreasethe tax captains'revenuebase, and finallybuy out bankrupttax captains,who by the end of the centuryhad lost most of their land to gentry landlords.As gentry landlordsincreasedtheir moneylending activities,small owners in financialdifficulties had to resort to sellingtheir land or sellingthemselves to gentrylandlordsas serfs or bondservants, therebyobtainingpartial exemptions from their tax obligations.Gentryestatesgrew to severalthousands of hectares in size, with a labor force of over 10,000.The estateswere often split up into smaller farms of about500 hectares,managedby speciallyeducatedbondservants (Shih 1992). Followingthe changefrom the Ming to the Qingdynastyin 1644,gentry landlordslost their tax privileges.Decliningpopulation and greater opportunities for off-farmemployment during 163050 increasedthe amountof land availableand, as in Westem Europe, improvedthe positionof peasants(Shih 1992). In the secondhalf of the seventeenth century,the heritabilityof serf statuswas repealed, and serfs were fully emancipated in 1728. Operationof a large homefarm using wage labor was no longer profitable,and landlordestatesemerged(Wiens1980), considerably improvingthe positionof tenants. Tenancyallowedoperationalholdingsto adjustto householdsize and led to very labor-intensive cultivation and high yields(Feuerwerker1980). Japan Land marketinterventions. To provideincentivesto makethe investments requiredto transform wastelandinto paddyland, the land reclamationbill of 723 made such land the heritablepersonal propertyof the developer.This provisionled to the emergenceof a separatecategoryof privateland that was tax exemptand excludedfrom the communal tenure systemin whichland was redistributed every six years amongall membersof the community (Takekoshi1967). DWrerental taxes and labor levies. In return for such land allotments,farmershad to pay tribute in kind as well as speciallabor servicesof up to 140 days a year (Takekoshi1967). Cleared and temple lands, as well as land belongingto the nobility,were exemptfrota all tribute requirements.In order to obtain immunityfrom tributes, manylandowners transferredtheir landsto templesor membersof the nobility.Whilethey had to give up the heritableright to the land, original landholdersdid in most cases continueto managethe land and homefarm cultivation remained minimal.Higher officials could accumulate manorsof enormoussize, but in turn had to commend their propertiesto higher-ranking individuals to protectthe immunityof their manor from tribute requirements,leadingto a complextenure-hierarchy in whichshares of manorsand associatedrights to incomewere traded (Sato 1977).Aroundthe end of the fourteenthcenturyincreasingland scarcity, as evidenced by physicalfragmentation of fieldsdue to intergenerational transfers,led to a gradual conversionto landlord estates(Keirstead1985), whichremainedin place until the nineteenthand twentiethcenturies. Java and Sumtra 87

Land marketintervendons. The AgrarianLandLaw of 1870declaredall uncultivated land inalienable stateproperty and leasedit to Europeancompanies whichestablished large scale plantations. Dferendal taxes and laborleves. Theseplantationswere operatedalmostexclusively using indentured labor (Breman1989).Laws such as the 'coolie ordinance' from 1880imposedsevere penaltieson indentured workerswho absconded and prison termson anybodyemploying such runawayworkers,thus indicatingthe scarcityof labor (Stoler 1985).Large scale cultivation was limitedto theseplantations.Whereindividual peasantholdingsprevailedat the beginningof colonial rule, authorities used the "cultivation system' (1820)to appropriate surplus withoutexpending resourcesfor capitalinvestment,and relyingon traditionalland tenure and laborexchange arrangements. Ihis systemrequiredfarmersto grow cash crops (predominantly coffeeor sugar) for the government on one-fifthof village lands in lieu of a land tax (Hart 1985).Both of these crops were integratedinto the local systemsof rice or upland cultivation (Geertz 1963). PhiHlppines Land marketInterventions. Land grants were givento privateindividuals and religiousorders after 1571(Roth1977)and by 1700all of the best land was under the controlof large estates (Cushner,1976). Dfferential taxationand laborlevkes.The Philippines, like countriesin Ladn America,had both encomlenda-the right to tributein labor, cash, or kindfrom a particularregion-and repanlmlnto-which distributed workersfor publicworksand privateSpanishbusinesses.The systemsdifferedfrom those in Latin America,however,in that the right to labor serviceswas hereditaryand often includedwholevillages.Workerson Europeanhaciendaswere exemptedfrom heavypublic worksand from taxes, makinghaciendaemployment highlyattractive.Despitethis advantage,the lack of economies of scale led to almostimmediate disintegration of rice-cultivating haciendasinto landlordestates. Moreover,by the nineteenth century,sugarproductionas well as processingwere controlled by tenantsas well (Roth 1977). Sri Lanka Land marketInterventions. Uplandareas whereslash andburn cultivation was practicedwere declaredcrown land in 1840(Bandarage 1983)and sold to privatecultivators,mainlyBritish,who establishedcoffeeplantations. D&Terentlal taxationand iabor levies. Corveelabor was abolished on public lands in 1818and replacedby a grain tax amounting to 10 percentof gross produce.Export agriculture-all land under coffee,cotton, sugar, indigo, opiumpoppies,and silk- was exemptedfrom the tribute (Bandarage 1983). Whilelandedinterestshad successfully opposedthe imposition of a generalland tax, the opportuniy to arn incomefrom coffeecultivation, togetherwith the absenceof a totally landless labor caste, severelylimitedthe willingness of local peopleto supplylaborto estates.Thus almostthe entire agricultural work force on coffeeestateshad to be imported:Censusfiguresindicatethat in 1871and 1881, 97 percentof some 200,000plantationworkerswere indentured Tamils, mainlyfrom India. The 3 percent of Singhalese plantationworkerswere mostlylow-country artisanswho were 88

paid competitive wagesand used their positionto accumulatecapitalfor own land purchases (Bandarage1983). Europe Prussia Land marketinterventions. Land grantsin Prussiadate from the thirteenthcenturyand were made to knightsand nobleswho were to colonizethe largelyunpopulated territory and provide militaryservicesto the king. Initially,population densitywas so low that very favorableterms were requiredto attract peasants:peasantsreceivedhereditaryusufructleasesto about32 hectaresof land each. Nobleknightsoperatedmodestlysizeddemesnesof abouttwo to three times the size whichwas providedto settlers(Hagen1985)to supplement the rents they receivedfrom peasants. Theywere 'not the masterbut the neighbor"of the farmer, and in economicterms they oftenfared worsethan full peasants(Luitge 1979).Depopulation causedby the BlackDeathincreasedthe amountof land available to the nobilitywho became'land rich but labor poor". Productiveuse of this land couldbe maintained only by attractingand settlingnew farmers,oftenon terms whichwere quite favorableto the settlers. Diferential taxationand laborlevies. Whilesettlerfarmershad a legal right to leave without the lords' consentas late as 1484(Hagen1985),the Landesverordnung of 1526no longer mentioned the right of the farmerto take legal actionagainsta landlordwho wouldnot allowhim to leave (Abel 1978), indicatinglandlords'increasedbargaining power (due to higherpopulation density). Such restrictionson peasants' mobilityfacilitated more widespreadadoptionof labor rents and an increase in labor requirements from two daysof servicea week for full peasantsin 1560to three days around 1600(Hagen1985). Still, landlordshad to rely on hired workersin additionto compulsorylabor services, estateswere relativelysmall:In 1624,Junkers' demesnetook up only 18 percentof the cultivatedland (Hagen 1985). The mainbenefitof labor servicesfor landlordswas the obligation of full peasantsto supplya pair of oxen or horsesand a driverrather than the contributions madeby non-&llpeasants(nicht sparMlhge Bauern)to demesnecultivation. Althoughlandowners increasedthe size of their demesneby addingthe land of familieswho died duringthe plagueyears of the fourteenthcenturyand the Thirty Years War of 161848, large farms began to dominatein Prussiaonly afterthe land reform in 1807-50(tge 1979).Three aspects of the reform contributedto the emergenceof large farms: the termsof separationrequiringfarmers with hereditaryor nonhereditary lifetimeleasesto cede one-thirdor one half their land to the Junkers in return for freedom;the initiallimitationof reform benefitsto "full peasants*and its extensionto other peasantswithoutlong-termleaserights only in 1850when, most peopleagree, it was "already too late" (Dickler 1975);and repealof tenancyprotectionlaws, whichhad been in place since 1750. These factors allowedJunkersto vastlyincreasetheir demesnesand to draw on an increasedpool of wage labor. The typicalJunker style of cultivation with permanentlaborersresidingon houseplots emergedas the predominant form of productionorganization (Ltltge 1979). After farm workers becamefree to migratein 1868and beganmovingwestward(Wunderlich 1961),they were gradually replacedby salaried and migratoryseasonalworkers,especiallyfrom Poland, where population density was high and landlessness was widespread(Diclder 1975).

Inputand outputmarket Iterventions. From the earliestsettlementdays, knightshad certain rightsof jurisdictionand monopolies on millingand on the manufacture and sale of alcohol.
89

However,the fact that they were willingto cedea gooddeal of their trade-related privilegesto entrepreneurs who engagedin land-clearing and attractingsettlersfrom the west illustrates just how pressingthe labor scarcitywas.
Russia

Land market intervendons. In the fourteenthcentury,princes,considering all land in their princedomas their patrimony(votchina), grantedland to nobleswho couldprovidethe labor force necessaryto cultivate the land and pay taxes.These landlordsin turn had to attractpeasantswith very favorableterms. In-kindpayments(obrok)remainedthe predominant type of peasantobligation,and, due to the limitedabilityto imposelabor rents (barshchina), homefarm cultivation was almost nonexistent (Blum1961). In 1565,Ivan IV confiscated the property(votchina)of almostall the old princedoms, convertingit into state land (oprichnina) and then using it for land grantsto rewardservitors. Servitorsdid not receivefreeholdtitle, acquiringonly usufructrightsunder servicetenure (pomestye) whichbecamethe dominantform of lay seignorialtenure. As a result, 'the personalpossession of landedpropertybecamea monopoly of a single class of Russiansociety-the servitorsof the tsar' (Blum1961:169).As land rights couldbe terminated at will by the tsar, continuedpossession of the land was conditional on the performance of serviceto the state. Indeed,landlordswho couldnot providepaymentin serviceor moneywere evicted,and the class of servitorswas subjectto high fluctuations, competition for labor was fierce,and homefarm cultivation remainedvery limited.The economicsituationof the servitorwas oftenprecariousuntil tenuresgraduallybecameheritablein the seventeenthcentury(Blum 1961). Restrictionson Jabormobilityand dWerenatata.taon. The extentof labor scarcityis illustratedby continuous!y moresevere restrictions on peasantcultivators'mobility.Between1400 and 1450, the right of peasantsto terminateleasesand moveon to anotherlandlordwas restrictedto two weekseach year. Even then peasantswere requiredto pay formidable"exit fees" (equivalent to 300 bushelsof oats or 120 bushelsof wheat;Blum 1961)before leaving.Landlordscompetedfiercely for labor and resortedto 'labor pirating",i.e. attractingworkersfrom other estatesby promises.In fact, such labor piratingbecame"the principallawfulwayby whichrenters transferredfrom one lord to the other", thoughillegalmeanswere oftenresortedto as well (Blum1961).The intduction in 1588of "forbidden years" duringwhichthe peasants'right to movewas temporarily suspendeddid not preventlabor piratingbecausethe law couldnot be enforced.Decreesin 1597and again in 1607 bound all peasantsto the place they were residingat the time of the censusof 1592, whichfacilitated enforcement of the law. The AssemblyCode of 1649, whichremainedvalid untfl about 1850, abolishedstatutesof limitationon the returnof fugitivepeasantsto their original landlord.It also made serfdomheritableby prohibiting the peasant's wife and progenyfrom movingas well. After 1661, fines for peasantraidinghad to be paid 'in serfs": for every iUlegal peasantfound on a landlord'sholding,the landlordhad to give up one of his own serf families.Serfs couldbe freely sold; restrictions prohibitingthe sale of serfs withoutland were unsuccessful. Serfswere also used as collateral,to be auctionedoff if their landlordwent bankrupt.In 1859, two-thirdsof all serfs were mortgaged.After 1719, the privilegesof peasants-mainlyat the frontiers-who had escapedserfdom were successively eliminated.They becameserf-likestatepeasants,subjectto taxes, quitrent,and conscription.By 1850more than 90 percentof the male population were serfs (Blum 1961).

90

In 1580, landlords'home farms (demesnes) were exemptedfrom taxaticn. With revenue requirements also rising, the tax burden on peasantsincreasedsubstantially, significantly loweringthe potentialreturn from cultivation (Blum1961).Peasantsrespondedby runningoff to the frontiers wherelandlordswere keen to attract labor and, becauseof temporaryexemptions from taxes, were ableto offer better conditions. Landlordsattemptedto tie peasantsto their holdingsthrough debt peonage.Under lawspassed between 1586and 1597, a debtor automatically fell into debt servitudeif he was unableto repaythe loan on time. He then had to work continuously for the creditorjust to pay the recurrentinterest. Withoutany possibilityof repayingthe principal,debt servitors' only advantageover slaveswas that they were to be freed followingthe creditor'sdeath (Blum1961). Input and outputmarket Interventions. Sinceneitherserfs nor state peasantswere allowedto engagein independent businessuntil the 1820sor 1830s,landlordsenjoyeda de factomonopolyover commercein their area, in additionto their formalmonopolyon alcoholmanufacture and sale. Latin America Chile Lnd market Interventions. In the mid-sixteenth century,town councils,free of the central supervision by a viceroyor governorthat was commonin Mexicoand Peru, handed out land to settlers 'with utmostgenerosityand ... in the face of royallegislationto the contrary"(Bauer 1980:4).In contrastto other Latin Americancountries,wherethe right to tribute was legally distinguished from land grants, and the de jure protectionof Indian communal land was enforcedby central authorities,encomenderos in Chilereceivedland grants in the middleof "their" Indians' communallands early on. The encomenderos were thus providedwith cheapand abundantlabor servicessuch that 'by the 1650slandownership and encomienda were filly integrated...[andJ the encomlenda was absorbedby the land' (Bauer 1980:8). Dfferentlal taxationand labor levies. Ihe main meansto providelabor to the mines was the mta whichrequired all Indian settlements to supplya certain proportionof their labor force for agricultureor public works, but in most cases the mines. Haciendaworkerswere exemptfrom the mfta and manyIndianssoughtrefuge from the cruel forcedlabor requirements by joining the ranks of the yanaconas,a group whichhad givenup all ties, includingland rights, to their original communities and, living in total dependence on individual Spaniards,formed the nuclearlabor force of the Spanishestates. A rise in demandfor wheatfrom Lima in 1687led to a considerable increasein such labor requirements with landowners relyingon either reconstituted encomlenda or on yanaconaswho were virtuallyenslavedand only given 3 days off a year to tend their house-plots(Pearse 1975).As on the EasternEuropeanJunker estates,able tenantswere used as "labor brokers" and obligedto supplythe haciendawith workers(veonesobligadosor reemplazantes) nearly year-round(Kay 1977). Input and ouwput marketInterventions. Large wheatgrownng farms in the Centralregion could not competeagainstwheatproducedon the more dynamic(and smallersized)farms in the South and were convertedinto livestockranches.In order to protectthem from competition from Argentinathey

91

lobbiedsuccessfully for the imposition of importtaxeson beef at the end of the 19thcentury.Such taxes were maintained despiteconsumerriots causedby high foodprices in 1905(Kay 1992). In this century,large landowners receivedspecialtreatmentto reducethe cost of mechanization. They receivedexemptions from importtariffsand low interestrate loans; real interestrates on mechanization loans in most of Latin Americaduringthe 1950sand early 1960swere actually negative.Farmers in Chile, Argentina,Brazil,and Venezuela paid back only 50 to 80 percentof their equipment loans (Abercombie 1972).
El Salvador

Land market Intervendons. Publicland was grantedto anybodywho was plantingit at least two third with coffeefrom 1857(Lindo-Fuentes 1990).A large land titlingprogram, initiatedin 1882, which was intendedto speed up the growthof coffeeproduction,is thoughtto have directlyaffected up to 40% of the territory of the country(Lindo-Fuentes 1990)and led to extraordinary concentration of land ownership.The 1882law requiredall occupants of ejido landsto registertheir claiLs (i.e. prove that they were cultivating the land and pay the titlingfee) withina period of six month. All lands not claimedin this way was to be sold at public auctions.IlliterateIndians,were oftennot awareof theserequirements and well-connected individuals couldtake considerable advantageof the legislation.The goal of establishing a successful export agriculturecouldhave been achievedby modernizing the credit systemand providingeducationto Indiansas well, in particularas Indianshad proven to be responsive to marketincentives before. Choiceof the land marketas the instrument to achievethe trnsformation illustratesthe administrative difficulties as well as the power of the elites who wouldbenefitfrom such legislation(Lindo-Fuentes 1990).
DIferental taxation and labor levies. In 1825vagrancylaws were passedrequiringIndiansto

carry work cards certifyingtheir employment (Lindo-Fuentes 1990).The penaltyfor vagrancywas Imprisonment. In 1847, landowners plantingmore than 15 000 coffeetrees obtainedexemption from public and militaryservicesfor themselves and all their workers.
Guatemala

Land marketlntervenlons. Whilethe Spanishmade some land grants in Guatemala in the early sixteenthcentury,their main land marketintervention was resettlement of the Indianpopulation in centalized villagesto facilitatetax administration and conversionof Indiansto Christianity. They limitedtheir activitiesto ranchingfor whichno land title was required(MacLeod1973).Titles, which were issued to Spaniardsthrough land grants, becameimportantonly in 1590-1630, followinga shift to culdvationof indigo. Dferential taxaton and labor kWes. Initially,Spaniardshad little interestin establishing intensiveagricultureand collectedtribute instead(suchIndiantribute contributed more than 80 percent of royal government revenue;Brockett1990).From 1540, tribute assessments were made in cash, and the need for cash incomewas an importantforce inducingIndiansfrom the highlandsto migrateto plantationareas 'MacLeod 1973).By the 1560sand 1570s,Indianswho had migratedfrom the highlandsin this way constituted the majorityof the coastalIndianpopulation. Beginig around 1600, Idian headmenwere requiredto providelaborcontingents (mandamlento)-whichcouldbe as high as a quarterof the workforce-for tasksof public interest (MacLeod295). Mandamlento labor was ideallysuitedto the seasonaldemandsof indigoprocessing. 92

of Indiansin indigofactorieswas widespread,despiteits legal prohibitionto prevent Employment (Lindo-Fuentes i090). The mandamiento system futher decline of the decimatedIndian population survivedwell into the 1880s,when it was used to providecheaplabor for Europeancoffeeplantations (Cambranes1985). Debt peonagewas legalizedin 1877, and by forcingdebtors to workoff their debts, provided of a flowof cheaplabor. Followingthe' with officialmeansof enforcingthe continuation landowners abolitionof debt peonage,vagrancylaws were adoptedin 1933in responseto the severe labor of a minimumof 1.1 to 2.8 hectaresof shortage.All Indians who could not prove owner-operatorship land were forced to work-mainly on plantations-for 100to 150 daysa year to dischargetheir "debt (Pearse 1975). to society."The requirement to carry work cards facilitatedenforcement Mexdco of Indiansbeginningin 1540deprivedthem of their Landmarket interventions. Resettlement traditionallands and placedthem on smaller,less productive holdings.Whilethe intentionof the resettlementprogramwas primarilyto raise moneyfor the crownby sellingthe Indians' land to basis of the Indianagricultural seriouslyreducedthe productive Europeans,the expropriations economy(Gibson1965;Taylor 1988). in the 1850s,and as land becameincreasinglyscarce, Communal lands were expropriated of communal open to potentialtenants. "The expropriation opportunities were alternative fewer tendencies.On the one hand, cheaptemporarylabor became villagesbrought abouttwo contradictory less and less necessaryfor the hacienda more readily availablethan before. This made It economically as the haciendasacquiredmore and other hand, labor. On the in central Mexicoto rely on forced but to shift the more land, muchof it of mediocrequality,they preferrednot to work it themselves risk to sharecroppersand tenants. The conditionof theseoccupantswas so precariousthat manyof them ... inevitablyincurreddebts with the haciendawhichthey couldnot repay" (Katz 1974:41).

received, after1490,encomlendas,i.e. settlers DferentoJ taxationand laborlevies. Spanish rightsto Indian villagesfrom whichthey couldetrac tribute in kind and labor services.Restrictions limitingthe use of tribute labor in agriculturewere imposedin some regions, in order to secure labor supplyfor public works.
In 1542, the originalencomlendas were restrictedto the right to collecttribute and the system in a more equitableway.While this of repartinento was used to distributeIndianlabor, supposedly it worsenedthe lot of Indians of the encomlenda, restrictedthe power of the originalbeneficiaries under repartimientio. to render labor services and who still had to pay tribute to encomenderos remainedin place but couldbe avoidedby workingon haciendas(the Tribute requirements haciendapaid the tribute). Tribute was often requiredto be paid in cash, forcing manyhighland Indiansto migrateto lowlandareas to obtainthe necessarycash income(Moerner 1978). Debt peonagewas not significantin the early period of colonization,but it later acquired importanceas a meansof tyinglaborersto the haciendaand loweringtheir wages.In 1790, 80 percent of peons in one area had a wtaldebt higher than the legal limit; their averagedebt was equivalentto eleven months'wages (Taylor1972).As landlordslet debt accumulateup to the point of the expectedfuturevalue of work performed,the systemcame very closeto slavery (debt peons were 93

the debt to their currentemployer).A law enactedin 1843secured even beingtraded by redeeming debts incurfedto haciendasbut also made it illegalto hire not only state enfocementto Ocollect* laborerswho had left their haciendawithoutpayingtheir debts and requiredthat they be returned increasein the (Katz 1974).Vagrancylaws passedin 1877and strictlyenforcedled to a considerable of deporteesand 'criminals" (Katz 1974). employment Viceroyalityof Peru (presentday Peru, Bolivia,and Ecuador) Land marketinterventiois.Beginningin 1540, land grantsbecamecommonin this region, with were the hectaresbeingrelativelyeasyto obtain.lhe main beneficiaries grantsof 120-800 i.e. Spaniardswho had receivedrightsto labor servicesfrom wholevillages(see encomenderos, below), sincewithoutIndiantributelaborto work the land, the latterwas virtuallyworthless.Once, all the land set asidefor this purposehad been exhausted,around 1557, "private' Indian land was amongSpaniards(Gonzales1985;Dav.es 1984). and distributed expropriated In the coastalareas, resetement under ViceroyToledoin 1570movedIndiansinto newly wherethey were assignedfarmlandsof ofteninferiorquality.Programsto review town-q establisbed existingSpanishland titles under which'Spaniardscouldlegallyacquireland that they had previously in 1589. In stolen from Indiansby payinga fee to the Crown"(Gonzales1985:15)were introduced positionof the 1641the samepatternwas appliedeven more rigorouslyto improvethe financial of Indianland, and all surplus land was soldto expropriations Spanishcrown:there were large-scale reductionin their holdings;they now possessedsome of Europeans.Indians 'suffereda considerable In the ArequipaValley,adultmarried men were the worst farmlandin the valley" (Davies1984:130). allottedan area of only abouthalf a hectare. conferredrights around 1530,the encomlenda Diferentlal taxaton and labor levies. Beginning local replaced who to Europeans, to tribute(in labor, cash, or kind) from a particularregion were, at least at the beginning,completely overlords.Holdersof this privilege(encomenderos) 1986).Whilemanyused lnbor unregulatedas to how muchor what form of tributeto assess(Ramirez of tributes in cash did reportedlyforce Indiansto borrow tributesto cultivatelarge farms, assessment lands to repaytheir debt (Davies1984).The right of individual funds and sell off abandoned use of Indiantributelabor for personalserviceswas abolishedabout to the exclusive encomendwros 1550, mainlyto free labor for public worksand the mines.The other benefitsof encomlenda remained,however. the mita, an Incaninstitutionfor the Spaniardstransformed Withthe abolitionof encomienda, for the arrangement labor-recruitment recruitng labor for public worksprojects, into a permanent eachvillagehad to supplya percentageof is mines. In additionto payingtributeto the encomendero, work force for "publicworks," whichmostlymeantworkin the mines. As work for Spanish many workersin the aldplanoare haciendasexemptedfrom the mlta and tributerequirements, reportedto have acceptedworkon haciendas.The class of yanaconas,who were residenton their tribal identities,emerged(Pearse 1975). abandoned haciendasand had completely Slaverywas extensiveafter 1580in the coastalvalleysfor the productionof sugar, cotton,and labor from resortedto indentured wine (Davies 1984).Whenslavery was abolished,sugarplantations China and Japan, whichcomprisedmorethan 90 percentof the work force on some estates(Gonzales 94

1985). Oth&r crops, predominantly cottonwere, howeverproducedunder tenancycontracts(Gonzales 1991)after slaverywas no longeravailble, suggesting that this form of labor was more profitable thar. farmnng the area under large farms. Africa Algeria Land marketInterventions. Withthe Frenchoccupation,all state, religious,and tribal land becamestateproperty;uncultivated and waste land was subjectto titlingwhichallowedsettlersto acquireland at no price and 'amountedto little short than robbery' (Ageron1991).In some cases, such titling left the Muslimswith slightlymorethan 5% of the land area and much of the land declaredwaste includedland grazedby nomadsin the courseof their migrations.Since the numberof setlers remainedlimited,various formsof settlement(mcludin, establishment of nativevillages)weie tried to make the colonyeconomically viable. Ihe desire to imposeFrench rule in Algeriaafter the 1870171 rebellionled to initiationof a large colonization and setlement programbetween1871and 1882.At a huge cost to government, settlerswere providedfree ?andand infrastructure but either soldout or farmedtheir land with native sharecroppers(Ageron1991).The so-called'settlers' law' from 1873allowedEuropeansto acquire rightsto vast amountsof community land by purchasinga small share thereofand led to the accumulation of vast estatesat little cost (Ageron 1991). D,fferenIa taxes and laborlevies. BeginningIn 1849,all Arabshad to pay head taxes from which those workingas sharecroppers or wagelaborerson Europeanfarms were exempt (Bennoune 1988). Still, while 'they had alwaysbeen willingto cultivatefor the French as khammesor sharecroppers",at the beginningof the 20th centuryonly about 12%of Arabs were workingas farm laborers. Frenchviticulturalists relied on foreign,immigrantlaborfrom mediterranean countries. Differential provisionof credit to Europeans,led to rapid growthof vine cultivation.Market fluctuations, togetherwith additionalland grants to te.anewly-richsettlers, led to the consolidation of large estatesof between4000 and 5000ha. Angola Land marketlnterw'ons. In 1838and again in 1865all "unoccupied'land couldbe givenas concessions to Europeans."The settlerswere given lands, seAs, tools, and slavesby the government, and measureswere taken to ensurethat their productscouldbe sold" (Clarence-Smith 1979, 15). From 1907to 1932,98 squaremiles were set aside for nativereserves,4 square mileswere givento Africansalongwith land titles, and about 1,800 square milesof the best land was givento Portuguese settlersand other foreigners(Bender1978). Dfferentla taxationand labor leves. After the abolitionof domesticslavery in 1875, slavery continuedin a varietyof forms but due to tremendous demandfor labor from the cocoaplantationsof Sao Tome, prices for slavesincreasedsteadily,makingit more profitableto export worker: than to use them on inefficien' settler farms (Clarence-Smith1979).Vagrancylawspassed in 1875subjected all "nonproductive" Africansto nonrmuneratedlabor contracts(Bender1978).The laws were replaced in 1926by nativelaws, whichprovidedfor paymentsof wagesbut retainedthe provision 95

that all Africansbh-' to workfor Europeanlandlordsor couldbe contractedoy the state (Henderson 1980). Egypt Land marketinterventons. Land grantsof the 1840sgave some 40 percentof the land to Turko-Egyptian landlordsand facilitated the formationof large estates(Richards1982).Expropriation of communal lands whichtook place in 1850-70,exacerbated this trend. Land taxes in 1856 (per acre) were four to six times higherfor smallholders than for the large land holdings(Richards1982) and in manycases large landowners did not pay taxesat all (Owen1986). Dtfferential taxationand labor levies.In contrastto their usual practice,the Ottomansin the sixteenthcenturydid not distributeEgypdanlands to militaryleadersbut assessedcollectivetribute. They wishedto avoiddisruptingagricultural productionin Egypt, 'the granaryof the Otte-man Empire" (Richards1983:7).Corv6elaborerswere recruitedinitiallyfor publicworksto set up an extensiveirrigationsystemand later for cottonproductionon the ruler's homefarm. Followingthe large land grantsmade in the 1840s,'large landowners arrangedto have corvee!aborersworkon their estatesand to get their peasantsexemptedfrom the corv6e*(Richards1982:23),thus closely parallelingeventson the Latin Americanhacienda. Large landowners obtainedconiiderable direct government subsidies for cotton-price stabilization programsin the early 1920sand 1930s,supplemented by an officiallimitationof the amountto be plantedto cotton and financialsupportto lower interestrates for large landowners which,by the 1930s,were heavilyindebted.Similarly,imposition of tariffson importedflourin 1932 and 1934and protectionof the marketfor domestically producedsugar, directlysupportedlarge landowners(Owen 1986). Kenya

Landmarket Intervendotos. With the arrivalof Europeans,all vacantland was declaredto be Crown land and sold to Europeansetders at extremelyfavorableconditions.Muchof the land continuedto be farmedby Africantenants,whichwere calledsquatters(Mosley1983).Africans' land rightswere limitedto reservesand a formalprohibition of Africanland purchasesoutsidethe reserves was codifiedin 1926.
Djfferentl taxation and labor levies.The Britishintroduced a numberof regressivehut and poll taxes in order to 'increase the native's cost of living (Bernan 1990:509). To pay thesetaxes, Africansinitiallydid not seek wagelabor but increasedproduction,mainlyon tenantedland. Despite repeatedrequestsfrom settlersto grant tax-exempt statusto Africansworkingon Europeanfarms, such taxeshad to be paid by workersas well, thus large estatesbased on wage labor remained relativelyunprofitable as compa. 4 to tenancy. The squatterlaw from 1918requiredtenantsto provideat least 180 days a year in labor servicesto their landlordat a wagenot to exceedtwo-thirdsof the wage for unskilledlabor. This ordinancewas amendedtwice (in 1926and 1939), both times increasing the minimumamountof For moredetail on Kenya, South Afiica,andZimbabwe, see Deminiger andBinsa%nger (1992). 96

3F

labor services(to 270 days por year in 1939), limitingthe area sllowedto be cultivatedas well as the amountof stock ownedper tenant, and makingevictionof tenantseasier. Labor passes, whichhad beet introducedin 1908,limitedthe mobilityof Africans;leavingwithoutthe employer'sconsentwas a criminaloffense(Berman1990). Input and Qowput marketlrervendons. A dual price systemfor maize, adoptedin the 1930s, reducedthe returns Africanfarmerscouldobtainfor the sameproduceas suppliedby their European counterpartsand, in addition,unloadedmost of the price risk on Africans(Mosley1983). Growerassociations that excludedAfricanswere formedfor most of the importantcash crops. High licensingfees kept Africansout of pyrethrumproduction,and they were prohibitedoutright from cultivating coffee(Berman1990). DuringWorldWar II, Europeanfarmersreceiveddirect subsidiesto mechanize their farms (Cone and Lipscomb1972). Sokotho-Callphate(presentday BurkinaFaso, Cameroon,Niger, and northeri Nig,ria) Land marketImeventons. After 1804, land was grantedto settlersby tile caliphate governmentin the areas arounddefensivecenters, the amountof land dependingon the numberof slavesowned.Thus "anyonewith slavescouldobtain enoughland to start a plantation' (Lovejoy 1980).ITere were about 100-200slavesper plantation,althoughthere are reports of officialswho managedto obtainholdingsof morr than 1,000 slaves(Lovejoy1978). Dterenti taxaton and labor leves. The patternof 'slavery' in the area, whichwas populatedby Hausa and Fulani, was characteristic of manyparts of Africa in the nineteenthcentury (Lovejoy1980).21 Slaveswhichmade up some50 to 75 percentof the local populationwere acquiredby warfare,direct seizure,or as tributefrom subjectedtrtbes. Limitedexport marketsand the relativelylow price of slavesOandowners couldreplenishtheir bondedworkforce through independent raids; Lovejoy1980)allowedrelativelylenienttreatmentof slaveswho enjoyedmore rights e.g. the possession of heritablehouse-plots (Hogendorn1977)and the right to self-redemption oftenusing fimdsacquiredby cultivating surplusland (Hill 1978)than the slaves acquiredfor cash by market-oriented plantationsin the Americas. Land and the absenceof economies of scale meant, however,that slave ownershad to take measuresto preventslavesfrom escapingand establishing their own operations(Hogendorn1977). Eventually,these factorsled to the demiseof the large holdings(Hopkins1973). Malawi Land market lntervendons. In 1894, Europeanswere allottedmore than 1.5 millionhectares,or about 15 percentof total arableland.

"h

IS is somediswsion in the littur _mnt of avauy ud sefdom.

an theappropritenomelatue for thissystem, which combines 97

Dferenial taxadon and laborlevies.Attempts to introducelabor tenancyon European-owned cottonlands were unsuccessful as farmersabandoned the land and fled to uncultivated crownland. The situationimprovedonly as a law was introduced in 1908whichallowedAfricansto gain a significant reductionin the head tax they had to pay by workingfor Europeancottongrowersfor at least one montha year. Africans'possibilityto gain a similarreductionof the head tax by producing cottonon tenantedland, was, due to landowners'pressure, eliminated (Mandala1990). Mozambique

LandmarketIntervendons. Exclusive propertyrightsin land and quasi-governmental authority, were in the early 19thcentury,grantedto lessees(oftencompanies) for a period of three generations under the institution of pra.o. The prazo-holder had to piovideminimalpublic services,cultivatepart of the property,pay quitrentand tithe, but couldlevy annualtributes(in cash, kind, or labor) on the local population and (see below)was endowedwith a complete monopolyon all trade withinand outsidethe area (Vailand White 1980).
DigerentIa taxationand labor levies. HIut taxes were established in 1854. After 1880,at least ha!f of die tax hid to be paid to the localprazo-holderin the form of labor services(Vailand White 1980). Under the vagrancylaw of 1899,all male Africansbetweenfourteenand sixty years old were legallyobligedto work. The area of cropsto be grownor the wage-employment requiredto satisfy this obligationcouldbe varied by localprazo-holders,providingthem with ampleinstruments to increasethe supplyof labor. Contingents of migratorylabor were often 'sold" to other areas (suchas SouthAfrica) wherelabor was relativelyscarce (Vailand White 1980).Vagrancylaws were repealed in 1926- at aboutthe time manyprazos were expiring- and the use of forced labor for 'private purposes"(i.e. non-quota production) was banned.The labor code of 1942institutedan obligatory labor requirement of six monthsfor all Africanmen. Input and outputmarketInerventions.In 1892all itinerantAfricantrade withinprazos was abolished,conferringa monopoly onprazo-holdersof all commercein their prazw(Vailand White 1980:132). Prazosturned into a kind of mini-state,each with its own closedeconomyand unlimited freedomfor the prazo-holder to determinethe terms of trade. Deprivedtraders to provideoutletsfor their produce 'that had madepeasaatproductionso attractiveto the local people' Africansalmost completely withdrewfrom cash-cropproductions and the prazos became'private laborpools from whichthe companies,by direct force or by indirectmanipulation of the economy,couldcompelthe labor they required"(Vailand White 1980:132).Following their expirationabout 1930,prazos were replacedby a 'concessionsystem".Concession holdersreceivedmonopolyrightsto purchasecotton and rice at state-administered low prices from Africangrowersin return for enforcingAfricans' work obligationsand providinginputsand supervision (Isaacman1992).Althoughexactionsfrom Africans were still high, (forced)cultivation of all but sugar revertedto smallerscale units rather than large scale farms.
South Africa

Land market Intervendons. Nativereserveswere firmlyestablished at the end of the 19th centuryalthoughthey were legallydefinedonly in 1912. For examplein Transvaalin 1870, the area allocatedto Africanreserves was less than a hundredthof the area available to whites(Bundy1985). 98

The Glen Grey Act (1894)restrictedAfricanland ownershipin the reservesto a parcel of no more than about3 hectaresand instituteda pervertedform of "communal tenure' whichbanned the sale, rental, and subdivision of land in order to preventthe emergenceof a class of independent African smallholders(Hendricks1990).The inabilityto sell land in the reserves,whichpersistsup to this day, is recognizedto be major reason for the low productivity of agriculturein the homelands(Lyno and Nieuwodt1991). Variouslegal measuresto discouragetenancyon Europeanfarms such as a limit on the amount of tenantsper farm in 1895and assessment of licensefees for tenantsin 1896 4idnot leadto the desired results. The NativeLandsAct (1912),circumscribed the extentof Africanreserves and declaredreal tenancyon Europeanfarms illegal,forcing all Africantenantsto either becomewage laborersor labor tenantson Europeanfarms or to moveto the reserves. D,ferentda taxes and labor levies.Prior to state intervention on their behalf, very limited marketproduc.aon by Europeanfarmerswas based on slavesor, after the prohibitionof slaveryin 1834, indenturedlabor. Mastersand ServantsLaws and the Mines and WorkersAu (1911)restrictedAfricans' in all sectorsexceptagriculture occupational mobilityand excludedthemfrom skilledoccupations (Lipton 1985).Restrictionson mobilitywere reinforcedand tightenedby pass laws (influxcontrols) from 1922and the establishment of laborbureausto enforcethe legislationfrom 1951(Lipton1985). I additionto restrictingAfricans'abilitythe obtainjobs outsideagriculture,more rigid pass laws and rigorous enforcement of such laws also provideda flowof cheap labor for white agriculturalists.It is estimatedthat, in 1949,about40 000 pass-lawoffenderswere suppliedto fas as prison laborers(Wilson1971).
Input and output market nterventions. European farmers were assisted by a large array of

monopolistic commodity marketingboardsand direct credit subsidies.In 1967,the amountspent on subsidizingabout 100,000whitefarms was almostdoublethe amountspent on educationfor more than 10 million Africans(Wilson1971). Tanganyika (part of present day Tanzania) Land market Inervendons. From the late 1890suntil 1904it was commonpractice to allocate severalvillages apieceto incomingGermansettlers. Dfferendal taaton and labor levies. A hut tax, to be paid in cashor labor services, was imposedin 1896 'not so muchfor the revenuewhichresultedbut as a meansof propellingthem into the labor market" (Rodney1979, 131)althoughhalf of the hut-taxincomewent direcdy to settlers' DistrictCouncils.Vi'llage headmenwere requiredto providea fixednumberof workerseach day to providelabor for the settlersto cultivatetheir rubber and sisal plantations.Every Africanwas issued a work card that obligatedhim to render servicesto an employerfor 120 days a year at a fixedwage or else to work on publicprojects (Illife 1979).In 1902, the Germansintroducedcompulsory cotton productionin certain coastalareas; it is widelyacceptedthat this schemewas one of the main causes leadingto the outbreakof the Maji Maji revolt in 1905(Coulson1982).

99

Africanswere excludedfrtm credit by the Credit to NativesOrdinanceof 1931whichrequired permissionbeforehe couldeven request a bank to lend him that an Afican have specificgovernment for coffeeled to the by Africansto set up a marketingcooperative money(Coulson1982).Attempts t to outlawtraditional attemp practicesof coffeegrowingin 1937, whichled to riots. Settler-dominated for African-grown crops were set up in the 1940sand creamedoff most of the marketng monopolies profitsfrom those crops (Coulson1982). Zimbabwe Land marketInterventons.Reservesfor Africansin remoteareasof oftenlow fertilitywere some changesuntil 1931(Palmer1977), underwent in 1896althoughtheir boundaries established specifically designed'African PurchaseAreas" when Africanland purchasesoutsidethe reserves mnd were declaredillegal. taxadonand laborlevies Whileall Africanswere subjectto poll andhut taxes, D&erendad againstcash rental an;' share tenancycontractsfom 1909(Palmer1979). specifictaxes discriminated migrationof Africansinto the easingthe tax load led to large-scale The prospectof (temporarily) prices were extremelylow in the early 1920s(Arrighi 1970). reserves when commodity in outputmarketswere and downturns Input and outputmarketInterwntions.Volatility such as increasedland bank loans,debt moratoria(especially interventions smoothedby government in 1930)and, afterprotractedlobbyingby Europeanproducers,the during the depression boards (for tobacco,dairy, pigs, and cotton)inselectedcrops marketdng of monopoly establishment of exportsubsidies. and the establishment againstby dual price systems. Africanmaize and livestockproducerswere discriminated Pressureby Europeanminers who were interestedin cheapsuppliesof maizelimitedthe extentof restrictions on Ailcan againstAfricanproducersin maize. Quarantine-based price discrimination livestocksales initiallyled to the buildupof large herds and the associatedsoil degradationin the destockingwas mandated;prices paid fer reserves. To ease this problem, in 1939, compulsory European of the pricesfetchedfor comparable third anWi one sith were between one Africancattle stock (Mosley 1983).

100

Appendix2 Now Market ImperfectionsAffectthe Farm Size- ProductivityRelation ewh farmhouehold conmsits of E fmiy membaer capableof conducting farm opertons as wel as supevising hie work of hired laborers." The householdownsy acres Conridera regionwh

of land, but the size of farm it actuallyoperates,denotedby A,, is determinedthroughrentingin or rentingout land at the goingrental rate & Outputdependson effective laborlid and land M. Effectivelabor is definedas the productof the numberof individuals employ -d and the effort i1 they exert. Whilefamilymemberscan be expectedto performfarm tasks with maximum effort, say i, hired laborers' work effortdependson the intensityof supervision. The intensityof supervision is representedby the ratio of householdmembersto operationalfarm size (M/0).It is assumedthat the marginalreturns to supervision intensityare diminishing, e = e(FIA), e'> 0, e' < 0, lim e=1
FIA -_oo

(1)

WithN hired laborersper operatedacre and a total of E householdmembers,the effectivelabor input is givenby L = F.e+A N-e(FIA). (2)

Outputis determinedby a neoclassical productionfunctionthat dependson effective labor and land,

Q=Q(L,A). (3)

Assumingconstantrets per operatedacre is givenby

to scale, and substituting equation2 in eciation 3, output

q=Q[1.(FIA)+N*e(FIA);lJIq[I- (FIA)+N e(FIA)J,

(4)

1/ This ppeadix is basedan Feder(1985).

101

whereq-Q/A andq'>0, q' <0. A simplebutrealhitcwayto introduce a creditmarket Imperfecdon to the present modelis to assume thatthe supply of creditdepends on the amount of landownedby the household denoted E&
S mS(VeS'Jr.

(5)

With$* wagerate denoted by w, Intermediate inputcostsper acreby c, and cash consumption expenditures per family member duringthe seasonby 0, the cashrequirements of a familywih an opwational holdingof sizeA are w.N.A+c -A+R.(A - V)+ U*F,andthe working capitalconstaintfced by the farmIs: w.N.A+c.A+R (A -

v)+eOF-sF v).

(6)

T7heaumr's objective is to maximize end-of-season profits(accounting for interest charges per dollarborrowed), subject to the working capitalconstn. Formally, max 1=-q[e U(F/A) + Ne(F/A)l A,N 4w.N.A + c.A i R.(A-VJ(l+O, subject to inequality (6) and 20, N20.
Detingto lU an tficda [+k* S(1 w*N.A-c.A-R.-(AV)4.F1, ft shaow przmof ft creit cons_ant,t Kuhn-Tcice cod for opmid,on iply: whA is

a^ -q-q 'fF/eA) +N(FIA) e -(w-N+c+A(1 +L +A) A,

at

(74)

ad
102

A cIN

A!q-w(.+ks.(82)
-W li

)O

a8N
N N4 (8b)

"1-S(v)-w*AJf -c'A -Rv-P)-B&

(9a)
(9a)

kA -0, 1

(9b)

AkO,>N20,120,
Westai with Ihoco in whichthe credit coaint
conditon (7a) ad (8.) for th optmal value of A and iFand diffe
_ A

(10) is not binding(X-0); solving st-order

tating yie:

dF F
ad4 (11)

dF

-m0.

(12) Equat (11)impliestot in to absc of biwng redit constraints,te elucity of fth opta opeaonal uizewith repect to houhold size s unity,i.e., thr is a fixet tiop nl holdingto householdsizertio. Mmamountof owd landdos not affectthe optimalratio. This outocomis intuitively expectedin a situationof constt rturn to scalewith prfect ntal d capitalmarts.

103

Equation(12) impliesthat the optimalnumberof hirnd laborersper acre is not affectedby household size (neitheris it affected by the sizeof the ownedholding).Sincethe earlierroLults imply that the operational holdingis proportional to household size, it folows that the numberof hired leborersper acre is identicalon ull farms, whateverthe sizeof the operational hutding(a. 4 that the ratio of family to hired labor declineswith operational holdingsize). A trivialextension of thes rslts is the observation that the level of effectivelaborper acre is identicalon all farms(sincethe ratioZ/A is fixedandA is the sam onall farms), assumingall other farm and farmerattributesare identical.It therefre followsthat outputper unit of land operatedis uot affected by the sizeof the operational fann or by the amountof landowned. The analysisand thepresentation in the casewhere the credit constraintis bindingQ\>0) are greatlysimplified by assumingthat the finctions q(*) and e( *) are of lxedelasticitywith respectto their arguments,that is, that (q'he,) *(LIA) * il, the elasticityof outut with rspect to effectivelabor,and (e'/e) (FIA) * i, the elasicity of effortwith respectto upesion, and where

dA
dV

WR

<w

and V are parmet a

model.

withinthe intew'l (0,1). Th& stadard treatmentof laborin the literaure - the in the presnt

assuption that hired laboris not affectedby familysupervision- is then the specialcasen0

Differeiation of equations (7a), (8a), (9a), under the assnuptionof an intmal solution, yieldsafter some manipulaton (13)

d4 -(1 dV Ils
_

-1 -11 u (c +R)
w

wF. w
Is -(
eA

ZcF

The denominator ow be dwsw to be positiveif second-ord conditions hold. It followsthat th sig of equation(13) is detmined by the sip of (I-" , j), whichis the limit valueof total output elasticitywithLrespect to land as the share of familylabortends to zero. To demonstrate that the relationbetweenper-hectarsyieldsand openrionalholdingsize can
follow different pattns within the frmneworkof the preset Laodel, we use te definition of effective labor and the fist-order conditions to calculate the optimal per-ectare inputof labor: 104

(IJA)*-v f[c+R)

./wa JIaJS

F/AJ(1(I-" 1 *

.).

(14)

Diffrentiationof quaton 14 with respectto ownedholdingsie y yields

d(14A) dV

;* eA

e di
w
At(1I1iL) (1S)

Clarlny,if the labormart is pedfect(a.0), laborper hectao of landdos not vay with fam style. Ibspection of equaton 13 verifiesthat a and the sig of equaton 1S thus dependsan th term in .squr brwket. In the cas where 17-7i *I 0, the relafionbetweenthe offecive laboriput per hecta and

ownedholdingsize can be negativeor positive.Consider,for instance,tho cas wher the output Iasticitv i equals'. Firt-orde conditions imply[(1- * (Ig)**A)-[( I <1Jc0, hec, in t ca where i-'A, it i.e., tho effective laborinput(andyieds) declin with ownedholdingsize. Mhm ame resultcan be obtaned for aiwll<. By an avWment of coStinuitysincein thecuo (l-1p-0 it holds thatdl&4/)I_>0 (in thatca the is a finalc.mional fam sa of weth), ther mustexis some low (but positive)valuesof the tem (1-""- it) for whichd(ld)l/d_>0 holds.The conclusion is, therefore,that one mayobservea posiiiveor a negativereaton betwee opetional holdingsiz and perhect yields,dep&udigon the relafive magnitudes of ti and p. In thocase (1-t *p)-0 ther wiUl be no oetion betw operational holdingsize and per-hwetacyields. followstdatd(/)Idi/<O,

105

BlbHogaphy

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