Land Ownership, Farm

Productivity, and Food Security in

Nepal

Ram N. Acharya

New Mexico State University

USA

Introduction

Access to land is crucial for farm production and

ensuring food security particularly in agrarian

societies like Nepal

Land serves as an effective instrument for obtaining

loans, building investments, accumulating wealth,

transferring affluence, and gaining social prestige

(Deininger and Binswanger 1999).

Owner cultivation, sharecropping, and fixed

rent are the most common tenancy forms

practiced in Nepal (Acharya and Ekelund

1998)

Tradition View on Tenancy Among three land tenure systems, sharecropping is the

most inefficient mode of production.

What is Sharecropping?

• Sharecropping is a system of agricultural

production where a landowner allows a sharecropper

to use the land in return for a share of the crop

produced on the land.

• The crop sharing rules vary from country to country

but 50-50 division is more common. The cost of

purchased inputs such as chemical fertilizer is often

shared between landlord and tenant.

Tradition View on Tenancy Cont…

Labor Output

1 3000

2 3800

3 4400

4 4800

5 5100

6 5300

7 5400

8 5450

Economic theory: Marginal Value Product (MVP)=Marginal input Cost (MIC)

MVP=MIC

An illustrative example

MVP MIC

3000 300

800 300

600 300

400 300

300 300

200 300

100 300

50 300

Output1 MVP1

1500 1500

1900 400

2200 300

2400 200

2550 150

2650 100

2700 50

2725 25

1000

2000

3000

4000

5000

1 2 3 4 5 6 7 8

Labor Production Function

Output Output1

Labor

0

500

1000

1500

2000

1 2 3 4 5 6 7 8

Marginal Output and Input

MVP

MIC

MVP1

Labor

Traditional (Marshallian) vs.

Chungian view on sharecropping

Landownership, Efficiency, and Equity

The major justifications for implementing redistributive land

reform policies are:

1. Smaller farms are more efficient than the large ones

(Benjamin 1995; Barrett 1996; Barrett et al 2010)

2. Unequal (skewed) distribution of land is socially unjust and

hinders economic development (Galor et al 2009)

Efficiency and equity

Efficiency – negative relationship between farm size and

productivity (Barrett et al 2010)

– Major problems with this observation

Omitted variables – land quality, irrigation, etc.

Technology – makes it possible to manage large farms

Landownership, Efficiency, and Equity

Equity – land reform can create a sense of equity but

it cannot substantially increase production efficiency

– Most farms in Nepal are too small to produce

enough to support farm families and ensure food

security throughout the year

– Agricultural technologies are lumpy and more

suitable for larger farms

– Historical trend – farm size tends to increase with

economic development (see graph in next page)

– Radical land reform policies are likely to fail in

increasing efficiency as well as equity in land

ownership.

50

70

90

110

130

150

170

190

1850 1900 1950 2000

mean

farm

siz

e in

hect

are

sAverage U.S. Farm Size (1850-2000)

Methodology

𝑑𝑋𝑖 = 𝛽𝑚𝑖

3

𝑚=1

𝐷𝑚 + 𝛼𝑖𝑃𝑎 + 𝜑𝑗𝑖

2

𝑗=1

𝐸𝑗 + 𝜀𝑖

Input intensity between owned and shared plots

where dXi is difference in input intensity (seed, compost,

fertilizers, bullock, family labor, hired labor, and other inputs)

between owned and sharecropped plots; Dm measures the

difference in weighted average of soil fertility (D1= fertile,

D2=moderate) and crop variety between owned and shared plots;

Pa measures the difference in owned and sharecropped plot size;

and Ej are village dummies.

Similar model is used to evaluate the impact of tenancy and

plot size on farm productivity

Data

Sample size and basic household characteristics

Empirical Results

Results and Conclusions

Tenancy effect, soil fertility, and plot size are the most

important factors in determining input and output

intensities.

Impact of plot size on farm production is much higher

than the impact of share tenancy, i.e., 17.49/6.87=2.55

times larer.

Land fragmentation is more serious problem than

sharecropping

Policies that promote land consolidation (increase plot size)

are likely to be more effective in increasing production

efficiency and enhancing food security in Nepal than those

that promote tenant ownership.

Questions?

Thank you!