ECONOMIC GROWTH CENTER
YALE UNIVERSITY
P.O. Box 208629
New Haven, CT 06520-8269
http://www.econ.yale.edu/~egcenter/
CENTER DISCUSSION PAPER NO. 929
The Profits of Power: Land Rights and
Agricultural Investment in Ghana
Markus Goldstein
The World Bank
and
Christopher Udry
Yale University
November 2005
Notes: Center Discussion Papers are preliminary materials circulated to stimulate discussions
and critical comments.
This research has received financial support from the NSF (grants SBR-9617694 and
SES-9905720), International Food Policy Research Institute, Institute for the Study of
World Politics, World Bank Research Committee, Fulbright Program, ESRC and Social
Science Research Council and the Pew Charitable Trust. We thank Daron Acemoglu,
Ernest Appiah, Oriana Bandiera, Abhijit Banerjee, Esther Duflo, Michael Kremer, Eliana
La Ferrara, W. Bentley MacLeod, Roger Myerson, Howard Pack, Rohini Pande, Ashok
Rai, Tony Smith, Duncan Thomas and Justin Wolfers for very helpful comments.
This paper can be downloaded without charge from the Social Science Research Network
electronic library at: http://ssrn.com/abstract=868655
An index to papers in the Economic Growth Center Discussion Paper Series is located at:
http://www.econ.yale.edu/~egcenter/research.htm
The Profits of Power: Land Rights and Agricultural Investment in Ghana
Markus Goldstein and Christopher Udry
Abstract
We examine the impact of ambiguous and contested land rights on investment and productivity in
agricultural in Akwapim, Ghana. We show that individuals who hold powerful positions in a local
political hierarchy have more secure tenure rights, and that as a consequence they invest more in
land fertility and have substantially higher output. The intensity of investments on different plots
cultivated by a given individual correspond to that individual’s security of tenure over those specific
plots, and in turn to the individual’s position in the political hierarchy relevant to those specific
plots. We interpret these results in the context of a simple model of the political allocation of land
rights in local matrilineages.
JEL codes: O12, O13, O17, P48
Keywords: Land tenure, Investment, Institutions
1Introduction
Institutions matter for growth and development. In particular, it is apparent that investment
incentives depend upon expectations of rights over the returns to that inv estment and hence on
the nature of property rights. In recent years, economists have paid increasing attention to this
hypothesis (and brought the argument into the broader public sphere, e.g. De Soto 2000). Eco-
nomic historians have provided a great deal of the evidence that bears on this hypothesis (North
1981; Jones 1987; Engerman and Sokoloff 2003). Additional evidence has been contributed from
cross-country regressions of economic growth on a variety of measures of institutional qua lity
(Acemoglu, Johnson, Robinson 2001, 2002; Easterly and Levine 2003; Hall and Jones 1999;
Pande and Udry 2005). This paper joins a growing microeconomic literature that explores
the pathways though which particular institutions influence in vestment or productivity (Besley
1995; Field 2003; Johnson, McMillan, Woodruff 2002). Our aim is to examine one particular
mechanism through which the nature of the system of propert y rights in a society can shape
its pattern of economic activity. We examine the connection from a set of complex and explic-
itly negotiable property rights over land to agricultural investment and, in turn, to agricultural
productivit y.
There are several obvious mechanisms through which property rights over land might influ-
ence investment in agriculture. Adam Smith focused attention on the possibility that cultivators’
fears of expropriation or loss of control over land on which investments hav e been made might
deter such investment.
1
In addition, access to credit migh t be hindered if property rights are
not sufficiently well-defined for land to serve as collateral for loans; and an inability to capture
potential gains from trade in improved land might reduce investment incentives. Each of these
1
In his discussion of the Act of Ejectment, which provided for compe nsation for past investments when a tenant
was evicted, Smith writes “wh en such farm ers have a lease for a term of years, they may sometim es find it for
their interest to lay out part of the ir capital in the further improvement of the farm; because t hey may sometimes
exp ect to recover it, with a large profit,beforetheexpirationofthelease. Thepossessionevenofsuchfarmers,
however, was long extremely prec arious, and still is so in m any parts of Europe. They could before the expiration
of their term be legally outed of their lease. ... [But since the Act, in England] the security of the tenant is equal
to that of the p roprietor. . . . Those laws and custom s so favourable to the yeomanry have pe rhaps contributed
more to the present grandeur of England than all their boasted regu lations of com merce taken together” (Smith
1974, Volume 1, Book II I, Chapter 2).
2
mechanisms has received a good deal of attention in what has become an important literature.
With few exceptions, however, these papers “fail to find strong evidence of significant effects of
property rights on investment” (Besley 1998, 361).
In much of Africa, explicit land transactions — sales, cash rentals, sharecropping — have
become more common over recent decades. However, the consensus of the literature is that “the
commercialisation of land transactions has not led to the consolidation of land rights into forms
of exclusiv e individual or corporate control comparable to Western notions of private property”
(Berry 1993, 104). Instead, land “is subject to multiple, overlapping claims and ongoing debate
over these claims’ legitimacy and their implicat ions for land use and the distribution of revenue”
(Berry, 2001, xxi). Individuals’ investments in a particular plot migh t in turn influence their
claims over that piece of land in complex patterns: “individually rewarded land rights are further
strengthened if land converters make long-term or permanent improv ements in the land, such
as tree planting. Land rights, however, tend to become weaker if land is put into fallow o ver
extended periods.” (Quisumbing et al., 2001, 55).
In an environment where fertilizer is expensive, land is relatively abundant and crop returns
sufficiently low, fallowing is a primary mechanism by which farmers increase their yields. A
significant portion of the agricultural land in West Africa is farmed under shifting cultivation, so
fallowing remains the most important investment in land productivity — despite the fact that it
may weaken land rights. In this paper we examine how farmers negotiate this delicate balance.
We show that farmers who lack local political power are not confiden t of maintaining their land
rights over a long fallow. As a consequence, they fallow their land for much shorter durations
than would be technically optimal, at the cost of a large proportion of their potential farm
output.
We provide a brief description of land tenure in southern Ghana in section 2. The primary
source of land for farming is the allocation to individuals of land con trolled by that individual’s
extended matrilineage, or abusua. The agronomics of in tercropped maize and cassava, which is
the main food crop farming system in the area, is discussed in section 3. The most important
inv estment that farmers mak e in their land in the study area is fallowing, so we provide a
simple model of efficient fallowing decisions to guide the first stages of our empirical work. The
data and the survey from which they are draw n is described in section 4. In section 5, we
3
show that profits per hectare on maize-cassava farms varies widely across apparen tly similar
plots cultivated by different individuals in the same household, a nd that this variation can be
attributed to variation in the length of time that these plots have been left fallow. We examine
the determinants of fallow durations in section 6, where we show that individuals with po werful
positions in local political hierarchies leave their plots fallow for years longer than do other
individuals. Fallow durations vary across the different plots cultivated by a single farmer,
depending upon the provenance of the land. Individuals with local political power fallow land
that they obtained through the political process of matrilineage land allocation significantly
longer than they do land obtained through other means. In section 7 we discuss the political
economy of land allocation within a matrilineage. We construct and test a simple model in which
land is redistributed to matrilineage members most in need, subject to asymmetric information
regarding off-farm income. We show that the extent of one’s need is imperfectly signalled by
fallowing choices. The cost to an individual of obtaining land from the matrilineage is the lost
output associated with the too-short fallow period that signals that person’s need for the land.
Section 8 concludes.
2 LandRightsinAkwapim
The complexity and flexibility of property rights in West Africa is apparent in our study area
in Akwapim, Ghana. Most of the land cultivated by farmers in these villages is under the
ultimate control of a paramount chief and is allocated locally through a matrilineage (abusua)
leadership.
2
Each farmer in the area cultivates on average 4 separate plots. Land is allocated
to individuals for use on the basis of his or her political influence and perceived need.
There is a rich literature that describes the land tenure systems of southern Ghana. The
most general principle is that land is ‘owned’ by the paramount chieftaincy (known as the
stool), and is controlled by a particular abusua subject to the abusua’s membership meeting
their continuing obligations as subjects of the stool. Individuals, in turn, have rights to the use
of farm land by virtue of membership in an abusua.
3
2
This is not to say other forms of ownership/contracts over land do not exist. We discuss these less prevalent
forms of tenure later.
3
There are numerous descriptions of this principle. See Amanor (2001, pp. 64-76), Klingelhofer (1972, p. 132),
4
