Essays on Land Lease Markets, Productivity, Biodiversity, and Environmental Variability

Abstract

This thesis consists of four papers. The titles and abstracts of the various essays are as follows. Paper 1: Tenure Insecurity, Transaction Costs in the Land Lease Market and Implications for Gendered Productivity Differentials This study assesses the link between land leasing behavior and productivity differentials between male and female-headed households. A double-moral hazard model allows us to show that the landlord’s tenure insecurity leads to a sub-optimal level of effort on the tenant’s part, via its impact on the likelihood of contract renewal. The model also predicts that a high search cost of a landlord leads to a higher probability of contract renewal. A lower probability of contract renewal leads to lower levels of tenant’s effort, and vice versa. The empirical findings support the hypotheses that female household heads have lower enforcement ability and that tenure insecurity is a significant negative determinant of productivity. However, the results show no support for a lower likelihood of contract renewal by female-headed households or for a significant impact of contract renewal on productivity. Paper 2: Heterogeneous Risk Preferences, Transaction Costs and Land Contract Choice The paper analyzes how heterogeneities in risk preferences, rate of time preferences and transaction costs affect the choice of contracts among participants in the land lease market. The analysis draws from both agency and transaction cost theories, which propose alternative explanations of contract choice. Unique data from Ethiopia, containing experimental risk, rate of time preference measures and transaction costs are employed in the analysis. Tenant characteristics are more important than those of landlords in explaining contract choice. The results do not support the risk-sharing hypothesis of the agency theory as a motivation for contract choice while there is some support that discount rates and transaction costs affect contract choice. The results also viii indicate that the land lease market serves as a resource pooling mechanism by bringing poorer landlords and tenants into sharing arrangements. Paper 3: Biodiversity Conservation Under an Imperfect Seed System: The role of Community Seed Banking Scheme The study is an empirical investigation of agrobiodiversity conservation decisions of small farmers in the central highlands of Ethiopia. The primary objective is to measure the effectiveness of Community Seed Banking (CSB) in enhancing diversity while providing productivity incentives. Our results indicate a significant impact of participation in CSB on farm-level agrobiodiversity. However, the level biodiversity conservation was not found to have the expected reinforcing impact on participation indicating no support for simultaneity. CSB participation also led to increase in productivity consistent with the need for such incentives to enhance diversity at a farm level. Our assessment of the performance of the GLS estimator yielded a significant discrepancy between the GLS and bootstrap estimates. This led to the conclusion that bootstrapping asymptotic estimations might be required for appropriate inference. Paper 4: Environmental Change, Species’ Coping Ability and the Insurance Value of Biodiversity This paper develops a measure of the value of biodiversity by incorporating a stochastic change in the environmental factor into an economy-ecosystem model of biodiversity. The analysis draws from an ecological model specifying the relationship between aggregate productivity, responsiveness to environmental change, and diversity. The value of biodiversity is derived as the contribution of diversity in enhancing the ecosystem’s adaptive response to environmental change. The results are relevant to biodiversity conservation efforts that target areas with differing degrees of environmental variation. In addition, our analysis of some features of global warming the results imply that with increased concerns of global warming, more needs to be invested in biodiversity.