Household income, land valuation and rural land market participation in Ecuador
This research provides an economic analysis of agricultural land access at the household level and its relationship with rural markets and poverty in Ecuador. We find that land inequality and land market imperfections have a direct effect on household income per capita and that there is a synergy between these and imperfections in the labor and credit markets, which magnify the effect of land inequality on rural household income. In addition, the presence of multiple market imperfections intensifies the quasi-fixity of factors other than land, which affects the contribution of land to profits and land values. The labor advantage of small farmers explains the remarkable difference in reservation prices per hectare between small and medium and large farmers. However, this effect is reduced for credit constrained households. Lack of land titles is not found to discourage investments in land or to cause land values to be smaller than for households with tiled land.
Consistent with these findings, we also observe that the demand for land by small farmers is significantly larger than the supply of land by large landowners both in the land sales and rental markets. Small farmers are found to be more active than larger farmers on both sides of the land markets and sharecropping arrangements are found to be especially common among the land poor. Land titles have a significant and positive effect on the likelihood to sell and similarly, credit access on the likelihood to purchase and rent in land.
We conclude that, given the difficulties that prevent desired land transfers from large landowners to the rural poor, it seems improbable that the market be able to achieve an optimal distribution of landownership without assistance from the government. Also, that for the potential benefits for rural development of increased land access to be realized, such an increase must be accompanied by better access to services so as to improve the competitiveness of the rural poor. Policies regarding the liberalization and stimulation of land rental markets and increase in the supply of credit in the rural sector are recommended.