Land tenure, population, and long-run growth

Posted by D. Vollrath on January 01, 2012 · 1 min read

Abstract: This paper brings together the development literature on land tenure with current research on population and long-run growth. Land-owners make a decision between fixed-rent, fixed-wage, and share-cropping contracts to hire tenants to operate their land. The choice of tenure contract affects the share of output going to tenants, and within a simple unified growth model this affects the relative price of food and therefore fertility. Fixed-wage contracts elicit the lowest fertility rate and fixed-rent contracts the highest, with share-cropping as an intermediate case. The implications of this for long-run growth depend on the assumptions one makes about scale effects in the aggregate economy. With increasing returns to scale, as in several models of innovation, fixed-rent contracts imply higher growth through a market size effect. Without such increasing returns, though, fixed-rent contracts lower output per capita through a depressing effect on accumulation.