Mutual Insurance and Land Security in Rural Ghana

In this project, we study the impact of land rights’ formalization on functioning of informal insurance and land re-allocations in Ghana’s rural communities. First, we provide empirical evidence suggesting that increasing formal land rights improve land security, efficiency of informal land allocations, agricultural productivity and informal risk-sharing. Second, we develop a dynamic model of land and risk sharing subject to limited commitment constraints, where the equilibrium degree of co-operation is determined by the degree of land rights chosen. We show that the model can rationalize our empirical findings and can serve as a useful quantitative laboratory allowing for investigating (i) the interaction between the customary tenure and mutual insurance systems; (ii) the causal impact of increasing the formality of land markets on the functioning of these informal institutions; (iii) the degree of land misallocation due to missing land rights or limited commitment constraints; and (iv) effects of allowing land to act as collateral for credit.