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Development Economics Paper
Land Distribution, Incentives and the Choice of Production Techniques in Nicaragua
Oriana Bandiera
April 2002
Paper No' DEDPS 34:
Full Paper (pdf)

Tags: agricultural productivity; asymmetric information; crop choice.

Does the distribution of land rights affect the choice of contractible techniques? I present evidence suggesting that Nicaraguan farmers are more likely to grow effort-intensive crops on owned rather than on rented plots. I consider two theoretical arguments that illustrate why property rights might matter. In the first the farmer is subject to limited liability; in the second the owner cannot commit to output-contingent contracts. In both cases choices might be inefficient regardless of land distribution. The efficiency loss, however, is lower when the farmer owns the land. Further evidence suggests that, in this context, the inefficiency derives from lack of commitment.