Market Design for Land Trade: Evidence from Uganda and Kenya
Agriculture in low-income countries is characterized by misallocation of land across farm ers, and fragmentation – the separation of farms into smaller plots – which increases costs and limits the use of increasing returns technologies. We argue that a carefully-designed set of trading rules can improve outcomes by addressing these problems, and test this using two lab-in-the-field experiments with smallholder farmers in Uganda and Kenya. First, with survey data, we document that agricultural land markets are thin, prone to expo sure risk, and suffer from coordination frictions. These characteristics typically hamper decentralized trade. Market design may improve outcomes by thickening markets, finding chains, and enforcing conditional contracts, but right-in-theory designs may be unfamiliar and hard for farmers to understand. Our first experiment, conducted in Uganda, simu lates status quo land markets and confirms severe inefficiency. In a second phase of the experiment we find large efficiency gains from a simple market design improvement, a centralization intervention that brings farmers together to trade at a set time. We then test whether designs that are more tailored to the land trade problem, but potentially harder to understand, can further improve outcomes. Our second experiment, in Kenya, finds that a computerized package exchange, which allows traders to specify a sequence of condi tional trades as a single transaction, performs particularly well. Our results suggest that improved market design can reduce market frictions and lead to important productivity gains among smallholder farmers.
Date:
26 May 2023, 14:00 (Friday, 5th week, Trinity 2023)
Venue:
Manor Road Building, Manor Road OX1 3UQ
Venue Details:
Seminar Room E or online https://zoom.us/j/96449352369
Speaker:
Jonathan de Quidt (Institute for International Economic Studies)
Organising department:
Department of Economics
Booking required?:
Not required
Audience:
Members of the University only
Editor:
Emma Heritage
