Property Rights in a Very Poor Country: Tenure Insecurity and Investment in Ethiopia

31 Pages Posted: 20 Apr 2016

See all articles by Daniel Ayalew Ali

Daniel Ayalew Ali

World Bank - Development Research Group (DECRG)

Stefan Dercon

University of Oxford - Department of Economics

Madhur Ghautam

World Bank

Date Written: September 1, 2007

Abstract

This paper provides evidence from one of the poorest countries of the world that the property rights matter for efficiency, investment, and growth. With all land state-owned, the threat of land redistribution never appears far off the agenda. Land rental and leasing have been made legal, but transfer rights remain restricted and the perception of continuing tenure insecurity remains quite strong. Using a unique panel data set, this study investigates whether transfer rights and tenure insecurity affect household investment decisions, focusing on trees and shrubs. The panel data estimates suggest that limited perceived transfer rights, and the threat of expropriation, negatively affect long-term investment in Ethiopian agriculture, contributing to the low returns from land and perpetuating low growth and poverty.

Keywords: Common Property Resource Development, Forestry, Municipal Housing and Land, Rural Development Knowledge & Information Systems, Urban Housing

Suggested Citation

Ali, Daniel Ayalew and Dercon, Stefan and Ghautam, Madhur, Property Rights in a Very Poor Country: Tenure Insecurity and Investment in Ethiopia (September 1, 2007). World Bank Policy Research Working Paper No. 4363, Available at SSRN: https://ssrn.com/abstract=1016259

Daniel Ayalew Ali

World Bank - Development Research Group (DECRG) ( email )

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Stefan Dercon

University of Oxford - Department of Economics ( email )

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Madhur Ghautam (Contact Author)

World Bank ( email )

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