Lack of access to productive assets, such as land, can reinforce the poverty cycle for poor families in developing countries. In many agricultural regions, access to land is severely constrained by a history of colonial power, conflict, or other dispossession and land rights issues. Land transfer programs have often been touted as a way to break this cycle both directly, by generating farm income, and indirectly by providing access to markets and credit which often is contingent on land ownership, and by the realization of a farmer’s productive and entrepreneurial potential over time. However, there has been little research that isolates the effects of land transfer programs making it difficult to determine its effectiveness as a poverty alleviation strategy.
The majority of South Africa’s population suffered confiscation of their land rights during colonial rule and Apartheid. After a decade of failed land reform policy, South Africa implemented the Land Redistribution for Agricultural Development (LRAD) program in 2001 in attempt to provide land to poor farmworkers interested in owning farms. Program applicant households were required to complete a lengthy and extensive application process and demonstrate their commitment to farming. Upon approval of an application, a program employee will negotiate for the purchase of the desired land using LRAD funds. However, applicants sometimes experience lengthy delays in the final stage of the process, during which land purchases are finalized. These delays are due to land market-related factors that have little to do with characteristics of either the land or the applicants.
The researchers sought to determine how land redistribution affects household welfare. Little evidence exists on this impact, because the non-random assignment of land transfer programs makes their effects inherently difficult to measure. The problems with the final stage of the LRAD grant approval process mentioned above – that applicants are randomly delayed or receive land despite having the same characteristics – create randomized treatment and comparison groups. The sample size consists of 1650 randomly selected households of which 448 received their grants for land purchase at the time of the study. The two groups were analyzed for any significant differences in demographic or socioeconomic characteristics and none were found. Thus, by comparing the two groups, the researchers estimated the impact of the program.
Researchers then tracked monthly per capita consumption to evaluate how land redistribution affected welfare. In order to understand the long-term returns to the land transfer, researchers estimated the returns as a function of the number of days since the transfer occurred. This is important because for many farmers, the first year can result in low returns as they are still making initial investments and gaining experience. Over time, as farmers become more productive and gain more access to markets such as credit and technology, the returns should increase.
Results and Policy Implications
On average, households that received land transfers experienced a 25 percent increase in per capita monthly consumption relative to the comparison group of approved applicant households stuck in the land transfer pipeline. After that time, consumption standards increase rapidly. By three years after the transfer, living standards are approximately 50 percent higher than those of the comparison group. Given that the typical land reform family began with a living standard equivalent to the South African poverty line, the impacts of this program imply a substantial medium term impact on poverty.
The results suggest that the transfer of productive assets, such as land, can increase wellbeing greater than the initial cost of the transfer, however, these improvements in household welfare are not immediate. Land redistribution can succeed in regions like South Africa, where arable land is available and there are many potential new farmers.
Photo Credit: Megan Blair, J-PAL, South Africa 2011