Ethiopia is one of the few countries in Africa to implement large-scale land titling
programmes aiming to improve land related-investments. Since 1995, Ethiopia also
has partially liberalised rural land rental markets with the aim of improving the
functioning of these markets. Evidence on whether these reforms resulted in
improved land access by the poor and increased land-related investments though are
scarce and inconclusive. This thesis investigates empirically the relationship between
land tenure issues on one hand, and land-related investments and the functioning of
rural land and labour markets on the other. It also analyses the relationship between
participation in land rental markets and household welfare. Detailed descriptive data
analysis and various econometric models were used to examine these issues. The data
source for the study is the Ethiopian Rural Household Survey (ERHS), which consists
of a panel of 1477 sample households covering four regions in the country.
Findings from the study show that factor, input, and financial markets are poorly
developed in rural Ethiopia. In addition, land title ownership does not give farmers
additional rights other than the rights provided in the federal and regional legislation.
This has particular ramifications. For instance, despite having a land title, farmers in
Ethiopia are not allowed by law to sell or use their land as collateral in credit markets.
There are also various limitations on land rental transactions. These findings suggest
that the preconditions for economic effectiveness of land titling are not satisfied in the
case of Ethiopia. Furthermore, in contrast to earlier studies, this study finds no significant link between
farmers’ perceptions of tenure insecurity and their land-related investment and factor market participation decisions. Instead, it establishes that poverty in faming resources
and market failures in the credit and factor markets are the major binding constraints
that adversely affect farmers’ land-related investment and factor market participation
decisions in rural Ethiopia. The results reveal that asset rich households were more
likely to get access to more land and labour through factor markets, and they were
also more likely to invest on their land, while female-headed and/or asset poor
households were more likely to lease out their land and remain poor.
The findings of this study do not necessarily suggest that the existing land tenure
system in Ethiopia is satisfactory for farmers’ intensification efforts. It is widely
argued that past and current land polices in the country have led to reduced and
fragmented land size holdings in rural areas. As a result, there is limited room for
farm intensification. For instance, data from this study show that among sample
households who did not grow tree crops on their land, 40% of them reported that land
shortage is the first major problem. In this regard, the existing land tenure system can
be equally restrictive for most farmers. Therefore, the results of the study suggest
that, without reforming the existing land policy and addressing problems in factor and
credit markets, land titling is expected to play a very limited role in improving tenure
security, investment, and land access for the rural poor.