Land rights and Agricultural Investment in Ghana

Summary

The paper “The profits of Power: Land rights and Agricultural Investment in Ghana”, put forward by Markus Goldstein (world bank) and Christopher Udry (Yale University), examines the effects of land rights on the investment and farm productivity in the Akwapim area in Ghana. It examines the relationship between social relations, political structures, institution and economic activity in order to understand the economic behaviour in Ghana.

The amount invested by a farmer on a plot and his productivity is directly linked to two factors:

1. The security of tenure
2. The position of the farmer in the political hierarchy with respect to the plot.

The most important investment made on the plot is the time for which it is left for Fallowing. Fallowing is a farming technique in which the land is left ideal for some time in order for the soil fertility to rejuvenate itself.

Ghana is an economy with 68% dependence on the agricultural sector. This implies that more than half of its population relies on agricultural activities for their income and livelihood. In Africa, in general, agricultural activity is organised individually, i.e., people tend to the farm individually than as a family, and so they have more control over the income that is generated from the farmlands. In western Africa most of the agricultural land is farmed under shifting cultivation, which results in shorter duration of fallowing periods. Studies have shown that there is a very strong gender differential that husbands and wives will achieve very different amounts of profits, with generally the husband having higher amount of profits than the wife. This is largely due to the duration for which the land has been left for fallowing. Fallowing and opportunity cost of capital for an individual determine agricultural productivity. It is during the Fallowing period that one’s right to the plot can be lost. There is a very strong link between the tenure security, the way the land was acquired (In Ghana, land can be acquired through two methods either by working under a stool(landowner) or hereditary land.), investment decisions, agricultural productivity and the income of the household. This area of study is particularly interesting in order to understand the economic behaviour of the people in Ghana, as well as, understanding how politics affects production and investment pattern, and why do people in Ghana not believe in working jointly and rather have individual entities or farmlands.

In Africa, the gender difference in welfare due to the differences in the productivity is a major concern which needs to be addressed. A study such as this will provide an economic policy maker of how the economy functions by understanding the connection between political system and people’s ability to make investments, and where is it that the changes need to be made and how to address these changes.

Some of the major studies that have been address this subject are “Productivity effects of Indigenous Land Tenure System in Sub-Saharan Africa” in 1993 by Frank Place and Peter Hazell, which used the household survey data to determine whether the land tenure systems is a major hindrance to agricultural productivity, “Property rights and Investment incentives: Theory and evidence from Ghana” in 1995 by Timothy Besley, which also examines the link between Tenure security and agricultural productivity.

The economic strategy undertaken in the paper is to examine the how the political and social positions of the individual affect the individual’s choice regarding fallowing duration conditional on plot characteristics and fixed effects.

In order to conduct the study, a sample of 519 plots out of which 61 were under cultivation for more than 3 years and which are spread across 4 village clusters has been selected with the distance between each plot of about 250 meters. About 18% of the sample consist of individuals who are officeholders. In total, 60 married couples were selected who were interviewed 15 times over the course of 2 years. This was done to reduce the recall error. The survey included questions on the core group of agricultural activities like harvests, sales, etc. The study is restricted to the farm lands where only a mixture of Maize and Cassava are grown. The plots selected for the study have a median duration of Fallowing of about 4 years and since multiple plots are cultivated by the same individual, thus every can be identified with one individual. The Data used in this study is the data for the study duration of 2 years collected from rural survey conducted in Akwapim South District. Another survey was conducted which included a questionnaire that provided an in-depth information about the plot rights and history of the household. It was further supplemented by data on soil fertility which provided information on the pH balance and organic matter of almost 80% of the plots.

The duration of Fallowing period varies on the basis of whether the individual holds an office (has a political position) or not. If the individual is an officeholder, then the fallowing duration is longer (generally about 6-8 years) than for non-officeholders. Profits vary across different plots cultivated by the same individual, due to the variation in the duration of fallowing.

The profits from a plot are calculated by taking the household labour at the gender-village-survey round the specific median wages. Let an individual i (in the h household) have access to set of plots. The individual I aims at maximising the present stream of profits. Profit depends on the time for which the plot has been left for fallow. Let where represents the number of years the plot has been left for fallow and Let be an increasing and concave function. Let be the annual discount rate per household. Further, let (constant) be the likelihood of losing the plot p during the fallowing period, which depends on i’s political position and the manner in which i received the plot.Increase in and leads to a fall in the optimal fallowing period. Also, for any two plots (p and q) that are cultivated by the same person the following holds true:-

1. if the security of tenure is similar
2. , if the physical characteristics are similar
3. , where represent the optimal fallow duration

Now, suppose that the cultivation cycle occurs every 2 year then, the expect discounted value of profits is as follows,

[i]

The opportunity cost across different plots that are cultivated by the same individual will be the same and so profits can be defined as, …………. Equation 3, where represents the vector of fixed characteristics of plot p like size of p, and soil quality etc. The following equation talks about the first order approximation of the differences in profits across households,

……… equation 4[ii]

Where hp represents the household where plot p’s cultivator lives, and the bars on the variables represent the averages of the variables with hp.

On estimating Equation 3 using the OLS (Ordinary Least Square Estimation) , it was found that not all the household were pareto efficient, there were variations in the tenure system and that women earned lower profits as compared to men. In order to carry out further estimation, a set of instrumental variables such as indicator that the household has been resident in the village, number of wives of the individual’s father, educations of the parents of the individual, etc. were selected and equation 3 was then estimated again which yield the following results:-

• Office holders tend to leave their land for longer duration for fallowing.
• The local and political status of the individual does result in influencing the security that individual feels in relation to the land rights.

On further investigation, it was found that the differential in the fallowing duration is mostly on the lands that have been allocated through matrilineage, the current wealth decreases if the mother of the cultivator was a farmer and it is higher when the cultivator’s father holds office. In addition, current wealth is positively linked to the number of wives and wives tend to have higher profits than their husbands.

I believe that the researchers should have also included soil quality as a variable in their regression equation, as soil quality will also affect the productivity and for every type of soil the duration of fallowing is different so they require different durations for fallowing. With the addition of soil quality they would have been able to carry out a more in-depth study.

[i] Golstein, Markus, and , Udry, Christopher.2008. The profits of power: Land Rights and Agricultural Investment in Ghana, Journal of political economy, vol.116, no.6; University of Chicago.

[ii] Golstein, Markus, and , Udry, Christopher.2008. The profits of power: Land Rights and Agricultural Investment in Ghana, Journal of political economy, vol.116, no.6; University of Chicago.

References

1. Golstein, Markus, and , Udry, Christopher.2008. The profits of power: Land Rights and Agricultural Investment in Ghana, Journal of political economy, vol.116, no.6; University of Chicago.