PUBLIC POLICY IN FOOD AND AGRICULTURE - Land Ownership and Property Rights - Montaner Larson, Janelle B.

LAND OWNERSHIP AND PROPERTY RIGHTS

Montaner Larson, Janelle B.
The Pennsylvania State University, PO Box 7009, Tulpehocken Road, Reading, PA
19610-6009, USA.

Keywords: Land tenure, Property rights, Land markets, Land policy, Land reform,
Land titling

Contents

1. Introduction: Definition and Importance of Land Tenure

2. Historical Discussion of Land Tenure
3. Land Tenancy Policies of the Late Twentieth Century
4. Advantages of Property Rights in Land

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4.1. Access to Credit

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4.2. Investment in Conservation and Improvements
4.3. Functioning Land Markets
5. Rural Land Markets and the Access of Poor People to Land
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6. Various Land Titling Projects
7. Concluding Remarks
Glossary
Bibliography
Biographical Sketch
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Summary
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The issues of land tenure and its relationship to poverty, inequality and economic
growth has waxed and waned in public policy. The topic is back on the public policy
agenda thanks to the evolving political situations of countries such as South Africa and
the former Soviet Union, and persistently concentrated landholdings in much of Latin
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America. Recent research has explored the limits of market mechanisms to provide
land access for the poor in the developing world and has found these mechanisms
inadequate. Primary among these policies is land titling (or land registration), the
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formal registration of land that had previously been used without a formal title. Land
titling is intended to lead to economic development by providing farmers access to
credit, providing the incentive to invest in the land and stimulating land markets.
Research has found these programs generally have mixed results. Farmers with greater
market access or larger farms are more likely to benefit, hence these programs are not
likely to benefit the poorest farmers or to lead to a broader, more equitable distribution
of land.

1. Introduction: Definition and Importance of Land Tenure

The issue of land reform and the results of various land reform policies have been
debated by agricultural development specialists and researchers for more than 40 years.
The topic is back on the public policy agenda thanks to the evolving political situations
of countries such as South Africa and the former Soviet Union, and persistently

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PUBLIC POLICY IN FOOD AND AGRICULTURE - Land Ownership and Property Rights - Montaner Larson, Janelle B.

concentrated landholdings in much of Latin America. It is still widely recognized that

the system of landholding continues to be one of the most significant factors in
determining social, economic and political power relations, especially in developing
countries where much of the wealth is based in land and agriculture. In addition to
shaping social, economic and political relationships, a countrys system of land tenure
also influences its political system and path of development. Often in rural areas of the
developing world, access to land is practically the only means of participation in the
political and economic life of the country.

Recent research has explored the limits of market mechanisms to provide land access
for the poor in the developing world and has found these mechanisms inadequate. The
distribution of income in the agricultural sector and the standard of living of the rural
population are affected by the degree of land concentration, as the system of land tenure
affects both the relative and absolute well being of the rural population. The pattern of
land ownership determines how land and labor are combined for production, which

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affects both the quantity produced and its distribution.

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2. Historical Discussion of Land Tenure
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"When the 'sacredness of property' is talked of, it should always be remembered, that
any sacredness does not belong in the same degree to landed property. No man made
the land. It is the original inheritance of the whole species. Its appropriation is wholly a
question of general expediency. When private property in land is not expedient, it is
unjust."
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"The first man who, having enclosed a piece of ground, bethought himself of saying
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'This is mine,' and found people simple enough to believe him, was the real founder of
civil society."
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As it has a basic role in production and the satisfaction of human needs, land has long
been considered a gift from nature, God or the State. To appropriate land for private
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gain at the expense of others is then considered 'wrong' or 'unnatural'. Rousseau

(1913:192) stated, "...the fruits of the earth belong to us all, and the earth itself to
nobody." This has been advocated again recently by Liberation Theologians in Latin
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America. Even Winston Churchill considered land to be unique among forms of

property.

"The immemorial custom practically of every moderate State, and the conclusions of the
greatest thinkers of the world, have always placed the tenure and transfer of blocks of
land on a wholly different category from other property. There has always been an
obvious distinction between that class of property, which is a vital interest to every
human being, and which is limited in extent, and other kinds of property."

The physiocrats of mid- to late-eighteenth century France believed that agriculture alone
was capable of creating wealth. They emphasized the importance of private land
ownership: without security of ownership, no one would have the security to cultivate or
incentive to improve the land. The proprietor, rather than the tenant, received the net
profit, but it was assumed that he earned it through such tasks as clearing and preparing

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PUBLIC POLICY IN FOOD AND AGRICULTURE - Land Ownership and Property Rights - Montaner Larson, Janelle B.

the land and building infrastructure. However, it was found to be difficult to calculate
what this 'just' return should be. As only agriculture was thought to create surplus,
physiocrats believed the taxation of rent should meet all a government's fiscal needs.
The physiocrats envisioned large farms with hired workers, and they also influenced the
ideas of Smith, Ricardo and Marx.

Classical economists saw three socio-economic groups composed of landowners,

capitalist tenant farmers and landless laborers with the respective returns of rent, profit
and wages. Unlike the physiocrats, they did not believe that agriculture was the only
productive economic pursuit. Classical economists determined the nature of rent to be
the surplus accruing to landlords after the deduction of wages, a return to capital and a
'normal profit' for farmers. Ricardo's theory of rent, developed in 1815, defined rent as
"...the difference between the return made to the more productive portions, and that
which is made to the least productive portion of capital employed upon the land." Under
this definition, the price of agricultural commodities and inputs determines the rent and

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not vice versa. Current economists concur, noting that land has value because it can

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earn a rent, rather than the opposite assumption that rent must be charged because of the
purchase price of land.
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Ricardo and Smith had different attitudes toward landlords. Smith stated that landlords
"reap where they never sowed" by charging rent for unimproved land or increasing rent
on improvements financed by the tenants themselves. However, he was not hostile to
landlords, as he saw their interests as intertwined with those of society. Ricardo
believed that landowners benefit from economic growth, but that they also may have
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interests that conflict with those of general society, such as on the issue of free trade.
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The classical economists generally agreed that large estates with serf or slave labor were
detrimental to the progress of agriculture. As is still argued against owners of
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haciendas (large, extensive estates) in Latin America today, they stated that such
owners had no inclination, ability or time to invest in their farms, while serfs or slaves
had little personal incentive to increase production. Tenancy was an improvement, but
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was still not efficient because there was no incentive for tenants to invest or to improve
their technology. Classical economists considered fixed-rent tenancies to be preferable
to sharecropping, and primarily favored owner-operators and small proprietors.
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Neoclassical economists treated land as just another input, and Marx did not distinguish
between ownership of land and capital. Neoclassical economists generally shifted from
concerns of growth and distribution to exchanges and allocations of resources. This
change in focus was primarily brought about because land ownership in developed
countries is of less significance.

3. Land Tenancy Policies of the Late Twentieth Century

'Land reform' or 'agrarian reform' has been defined to mean everything from colonization,
to land confiscation and redistribution, to improvements in agricultural technology.
However, it is most generally defined as a compulsory take-over of land, usually by the
State, from the largest landowners with (partial) compensation, and reallocating the land
more broadly than before. The fundamental purpose of what is traditionally defined as

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PUBLIC POLICY IN FOOD AND AGRICULTURE - Land Ownership and Property Rights - Montaner Larson, Janelle B.

land reform is to promote equity. While it may also induce growth, the primary motivation
is to reduce poverty by reducing inequality. Under this definition, colonization schemes
and reform of tenure, including land titling, do not qualify as reform because they do not
challenge the rural power structure that is based in the unequal distribution of land.
Sometimes, development planners attempt to reduce the significance of land by injecting
capital into agriculture through technical assistance or credit programs. This is generally
not included as reform either. Others advocate considering only 'integral reform' that
includes supplies of other services such as credit, inputs and marketing, to be true reform.
This, however, can be used as an excuse to postpone reform indefinitely as the necessary
resources are never available. It is generally agreed that the goals of equity cannot be met
without changes in the basic redistribution of resources and political power, which will not
result without changes in the skewed landownership patterns found primarily in Latin
America.

A high concentration of land ownership, increasing rural-urban migration, a high but

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unrealized productive capacity with an unfulfilled potential to provide employment for

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rural people, a highly-skewed income distribution and great differences between the
masses of rural people and the upper class in income, education and culture are all
characteristic of much of the developing world, especially Latin America, today.
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Without agrarian reform and a redistribution of economic and political power, it would
be difficult to modify institutions and reach the goals of reducing mass poverty and
creating a more equitable distribution of income-earning opportunities. Contrary to
what has been commonly practised, increased agricultural production and a more
equitable distribution of the fruits of that production must be viewed as parts of the
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same process. It is widely asserted that because redistribution is needed to increase

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production, dealing with them separately has not worked. When considering food
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availability, limits on production are related to the system of distribution and demand.
The problem is rooted in the institutional structure and cannot be solved by simply
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trying to raise production.

The links between highly unequal land ownership, slowed agricultural development and
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rural poverty were recognized, at least in principle, by donor organizations and

governments in Latin America in the 1960s. Encouraged by the Alliance for Progress,
most countries in the region passed some sort of agrarian reform law in the 1960s or
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1970s, although much of this reform was never carried out. Financing, as well as the
political will and ability to enact far-reaching reform were limited, and starting in the
late 1970s and through the 1990s, governments and international agencies turned to
modifying market forces as a means to increase the access of the rural poor to land.
Primary among these policies was land titling (or land registration), the formal
registration of land that had previously been used without a formal title.

4. Advantages of Property Rights in Land

One does not own property, i.e., land, per se, but rather rights to and over that property.
This bundle of rights usually includes (within the limits of the law) the right to its use,
the right to exclude others from its use and the right to offer its use to others. Although
these rights are exclusive, they are not absolute. When dealing with land, the bundle of
rights is generally split between the public and private individuals and varies across

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PUBLIC POLICY IN FOOD AND AGRICULTURE - Land Ownership and Property Rights - Montaner Larson, Janelle B.

time and countries and between various systems of land tenure. Generally, owners have
the right to use, sell, trade, lease, mortgage or subdivide their land, while the rights of
taxation, regulation and eminent domain are reserved by the State. Tenure insecurity is
likely to result when these rights are not clearly defined and supported by legal
institutions. Government-issued land titles are meant to protect holders' rights to the
land against competing claims. Titles also facilitate transfer as they show the possessor
of the titled land is truly the owner and has the right to transfer this ownership to others.

Government-issued land titles are hypothesized to encourage rural development through

three avenues. First, land titles are meant to facilitate access to credit (the ‘collateral
effect’). Banks value them as collateral, so it is hypothesized that titling increases
access to formal credit. Second, by protecting landholders’ rights to the land against
competing claims, titles are intended to increase landholders’ sense of tenure security
and therefore make them more likely to be better stewards of the land and to make long-
term investments in the land (the ‘security’ or ‘investment effect’). Finally, titles also

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facilitate transfers as they show the possessor of the titled land is truly the owner and

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has the right to transfer this ownership to others. This means that with improved factor
mobility, the land is more likely to find its way to the most productive producer (the
‘transaction effect’).
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Bibliography
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Atwood, D. A. (1990) Land Registration in Africa: The Impact on Agricultural Production. World
Development 18 (5), 659-671. [This article provides a theoretical overview of the role of land titling in land
markets and access to credit as well as a case study from Africa.]
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Barlowe, R. (1986) Land Resource Economics: The Economics of Real Estate, 4th ed. Englewood Cliffs, NJ:
Prentice-Hall. [This book discusses the economic theory of property rights in land.]
Barraclough, S. (1970) Alternate Land Tenure Systems Resulting From Agrarian Reform in Latin America.
Land Economics 46, 215-228. [This article provides land tenure in Latin America, and describes its role in the
economic and political life of the country.]
Barrows, R. and Roth, M. (1990) Land Tenure and Investment in African Agriculture: Theory and Evidence.
Journal of Modern African Studies 28 (2), 265-297. [This paper explores the impact of titling on credit and
investment, and found no relationship between titling and investment in Kenya.]
Berry, R.A., and Cline, W.R. (1979) Agrarian Structure and Productivity in Developing Countries.
Baltimore, MD: Johns Hopkins University Press, for the ILO. [This book describes, among other topics, the
inverse relationship between farm size and productivity often found in the developing world.]
Besley, T. (1995) Property Rights and Investment Incentives: Theory and Evidence from Ghana. Journal
of Political Economy 103 (51), 903-937. [This article discusses the role of enhanced property rights in
agricultural investment in Ghana.]

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PUBLIC POLICY IN FOOD AND AGRICULTURE - Land Ownership and Property Rights - Montaner Larson, Janelle B.

Binswanger, H.P. and Elgin, M. (1990) What are the Prospects for Land Reform? in Agriculture and
Governments in an Interdependent World, Proceedings of the Twentieth International Conference of
Agricultural Economists, 1988, Hants, England: Dartmouth. [This article indicates land markets are unlikely
to shift land from larger to smaller farms.]
Carter, M.R., and Barham, B.L. (1996) Level Playing Fields and Lassez Faire: Postliberal Development
Strategy in Inegalitarian Agrarian Economies. World Development 24(7), 1133-1149. [This article finds low
wealth farms operating within lassez faire economies face disadvantages that perpetuate or deepen
inequality.]
Carter, M.R. and Mesbah, D. (1993) Can Land Market Reform Mitigate the Exclusionary Aspects of Rapid
Agro-Export Growth? World Development 21(7), 1085-1100. [This paper posits that land markets, in the
presence of market imperfections, are likely to shift land away from small farmers.]
Carter, M.R., Wiebe, K.D., and Blarel, B. (1994) Tenure Security for Whom? Differential Impacts of Land
Policy in Kenya, in Searching for Tenure Security in Africa. John Bruce and Shem Migot-Adholla (eds.).
Dubuque, Iowa: Kendall/Hunt Publishers. [This is a chapter that explores the interaction of land titles with
other factors.]
Carter, M.R. and Olinto, P. (1997) L’Impact Differencie de la Reforme des Droits de Propriete sur la

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Richesse. (“The Wealth-Differentiated Impact of Property Rights Reform.”) Revue d’Economie du

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Developpement. 0(2), 39-64.

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Carter, M.R. and Zimmerman, F.J. (2000) The Dynamic Cost and Persistence of Asset Inequality in an
Agrarian Economy. Journal of Development Economics 63, 265-302. [This paper finds that redistributive
policies could improve a market’s efficiency and equity performance.]
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Christodoulou, D. (1990) The Unpromised Land: Agrarian Reform and Conflict Worldwide. London: Zed
Books, Ltd. [This book discusses the continued role of land in political conflict.]
Coldham, S.F.R. (1979) Land Tenure Reforms in Kenya: the Limits of Law. Journal of Modern African
Studies 17 (4), 615-627. [This article examined the effects of land titling in Kenya and found much of the
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registry was out of date.]

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Currie, J. M. (1981) The Economic Theory of Agricultural Land Tenure. Cambridge: Cambridge University
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Press. [This book provides an excellent history of the role of land in economic theory, as is found in section
2.]
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Dorner, P. ed. (1971) Land Reform in Latin America: Issues and Cases. Madison, WI: Land Economics,
University of Wisconsin. [This seminal book discusses the outcome of various land reform policies in Latin
America.]
Dorner, P. (1972) Land Reform and Economic Development. Harmondsworth, Middlesex: Penguin Books,
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Ltd. [This book suggests land reform is necessary for development.]

Feder, G., Onchan, T., Chalamwong, Y., and Hongladarom, C. (1988) Land Policies and Farm Productivity
in Thailand. Baltimore: Johns Hopkins University Press. [This book, and articles by the authors, present
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analyses of the effects of land titling in Thailand.]

Ghose, A.K. ed. (1983) Agrarian Reform in Contemporary Developing Countries. Croom Helm, London:
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Larson, J.M., Tyler, G., and Palaskas, T. (1999). Land Titling and Technical Efficiency Among Small Coffee
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©Encyclopedia of Life Support Systems (EOLSS)

PUBLIC POLICY IN FOOD AND AGRICULTURE - Land Ownership and Property Rights - Montaner Larson, Janelle B.

Dilemmas on the Road to Further Reform. World Development. 26(10), 1789-1806. [This article explores the
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generally able to adjust to the needs of modern agriculture while providing equitable access to land.]

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[This book describes the effects of some 30 years of agrarian reform in Latin America.]
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Biographical Sketch

Janelle B. Montaner Larson, D.Phil. received her doctorate in Agricultural Economics from the
University of Oxford in 1995. She is currently an Associate Professor of Agricultural Economics at the
Pennsylvania State University, Berks Campus.
Dr. Larson's primary research interests are in land tenure issues and rural economic development, both
internationally and domestically. She has researched land titling and land markets in Latin America and is
looking at the effects of development on agriculture in urbanizing areas domestically.

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