Farm security and agricultural development

Smallholder agriculture: Risky business

Small-scale farming is a risky endeavour as smallholder farmers in low-income settings face a number of pervasive risks during the planting and growing seasons, increasingly driven by climate change (VoxDevLit: Climate Adaptation 2023), and also post-production risks such as from spoiling (Aggarwal et al. (2018), Aker et al. (2023)).

Tenure security and agricultural production

As the primary input into agriculture, rights over land are naturally a serious concern for farmers. Secure land tenure encourages investment to improve agricultural productivity, such as fallowing (Goldstein and Udry 2008) and profitable non-agricultural activities such as migration (de Janvry et al. 2015). One example of this is an intervention to register informal land claims in peri-urban Ghana. Agyei-Holmes et. al (2020) found that, rather than increasing investment in agriculture or borrowing against land assets, farmers decreased landholdings and reallocated labour towards urban non-farm economic activities. This effect is larger where plot tenure was especially vulnerable, which suggests that agricultural households allocate labour inefficiently to protect their land.

In Goldstein et. al (2018) where land tenure is formalised and made more secure (though without becoming tradeable) also finds that improved property security impacts agricultural production. They find that farming households – particularly those headed by women, who are generally less able to secure land – make more agricultural investments with a longer payoff, such as tree planting and other multi-year perennial crops. They find this even within the plots owned by a single farmer. Female headed households are more likely to leave plots fallow when they are included in the treatment area, compared to those plots outside the treatment area without improved security.

Together these studies show that property rights over land are a significant factor in agricultural production. They also show that farmers allocate their labour partly to address imperfect security and that, by spending more time on insecure plots, they can prevent expropriation. This is one mechanism by which security interventions can improve agricultural productivity, by reducing the need to over-allocate labour to insecure plots. The way that households respond to improved security depends, however, on the options available. Where farmers have access to land markets and off-farm economic opportunities, improved security can lead to reduced agricultural production and more off-farm economic activity.

Formalised land tenure, therefore, can reduce the insecurity of property held by farmers, which in turn allows them to reallocate the labour that was being used, in part, to secure plots with insecure tenure. This reallocation can, where land markets exist, lead to reduced agricultural production and increased nonfarm economic activity. Otherwise, this labour released from protecting property is often reallocated towards cultivation on other plots that were originally more secure and required less guarding.

Addressing insecurity to theft and crop-burning

Recent work also shows that farmers distort their production decisions due to vulnerability to crop theft, a form of insecurity that has received less attention. The direct costs of insecure property in developing countries is significant, from the amount that firms spend on unproductive guards (Besley and Mueller 2018) or the amount of gifts that farmers give to neighbours to prevent people from stealing their crops (Schechter 2007). However, there may also be less easily observed costs of theft risk. It is commonly perceived that farms are at greater risk of theft if they grow less-common crops, and if they regularly leave their farms. If this fear dissuades farmers from taking advantage of profitable opportunities, the costs of fear of theft could be significant even if little actual theft is occurring.

In my research (Dyer 2023), I investigate this challenge by matching farmers in Kenya with trusted farm watchmen. Results show that treated farmers adjusted their cropping patterns and time use. They were significantly more likely to have begun planting a new crop or allocated more land to a crop as a result of reduced theft risk. Farmers also reported that they had increased their sale of crops at off-farm markets.

In addition to these production and marketing decisions, there was also an increase in the value of agricultural output among treated farmers. This did not occur for the crops where theft was likely, and instead came from crops such as cassava which, as a staple root crop that is difficult to harvest, are less likely to be stolen. This suggests that the effect is likely not from reductions in actual theft. As with the other studies of tenure security discussed earlier, what is more likely is that farmers are able to reallocate labour away from more theft-prone plots, as there is less need to guard them, towards less theft-prone.

This insecurity against crime also appears to be related to social pressure on those who innovate or deviate from norms. Kebede and Zizzo (2015) show that in Ethiopian villages where farmers are more likely to “burn money” to reduce inequality in lab games, there is also reduced agricultural innovation. This suggests that social norms may punish farmers who deviate from standard practice to pursue profitable opportunities.

While this piece focuses on insecurity in agriculture, other forms of economic activity in developing countries also face significant risks of theft which distort their business practices. As Butinda et. al (2023) in DR Congo shows, perceived risk of theft leads to sub-optimally low levels of stock held by beer sellers.

How to resolve security issues?

The evidence suggests, therefore, that insecurity against theft imposes some subtle but pervasive costs in the form of unproductively allocated labour and reduced innovation and variation in agricultural production. The evidence from the watchman study also suggests that there are interventions which can effectively reduce this type of risk. This begs the question – why does this insecurity persist? The answer in this context is relatively straightforward. While farm watchmen do reduce the risk of theft and lead to increased incomes, the benefits do not cover the cost of hiring a watchman. As that intervention (one watchman for one farm) was designed to isolate the specific mechanism of insecurity against theft rather than as a cost-benefit evaluation of a policy-ready intervention, this is not a surprise.

There is suggestive evidence, however, that security interventions have locally positive spillovers, with neighbours in the watchman project also reporting improved security. This suggests that such interventions may be better implemented as public goods and could be profitable if implemented for an entire neighbourhood. Again, this is not unexpected – there’s a reason why we generally rely on the police to deter theft rather than every single household employing a guard. There is one other aspect of spillovers that is particularly fascinating. The watchman study provides suggestive evidence that adopting a new crop would be less at risk of theft if others were also adopting. In addition to being a public good problem, insecurity of farms against theft may also be a coordination problem, where if a critical mass of farmers were to adopt higher-value agricultural production together, the perceived security risk would be less of an issue.

What next?

Recent evidence suggests that insecurity of land tenure and risk of crop theft causes small-scale farmers to distort their allocation of labour and land. This area remains one with significant potential for future research as we seek to understand how to effectively relax this constraint, and how this might empower smallholder farmers.

References

Aggarwal, S, E Francis, and J Robinson (2018), "Grain Today, Gain Tomorrow: Evidence from a Storage Experiment with Savings Clubs in Kenya," Journal of Development Economics, 134: 1–15. https://doi.org/10.1016/j.jdeveco.2018.04.001.

Agyei-Holmes, A, N Buehren, M Goldstein, R Osei, I Osei-Akoto, and C Udry (2020), "The Effects of Land Title Registration on Tenure Security, Investment and the Allocation of Productive Resources: Evidence from Ghana," Policy Research Working Papers, The World Bank. https://doi.org/10.1596/1813-9450-9376.

Aker, J C, B Dillon, and C J Welch (2023), "Demand, Supply and Long-Term Adoption: Evidence from a Storage Technology in West Africa," Journal of Development Economics, 165: 103129. https://doi.org/10.1016/j.jdeveco.2023.103129.

Besley, T and H Mueller (2018), "Predation, Protection, and Productivity: A Firm-Level Perspective," American Economic Journal: Macroeconomics, 10: 184–221.

Butinda, L D, A A Lameke, N Nunn, M Posch, and R Sanchez de la Sierra (2023), "On the Importance of African Traditional Religion for Economic Behavior." Working Paper.

de Janvry, A, K Emerick, M Gonzalez-Navarro, and E Sadoulet (2015), "Delinking Land Rights from Land Use: Certification and Migration in Mexico," American Economic Review, 105(10): 3125–49.

Dyer, J (2023), "The Fruits (and Vegetables) of Crime: Protection from Theft and Agricultural Development," Journal of Development Economics, 163: 103109. https://doi.org/10.1016/j.jdeveco.2023.103109.

Goldstein, M, K Houngbedji, F Kondylis, M O’Sullivan, and H Selod (2018), "Formalization without Certification? Experimental Evidence on Property Rights and Investment," Journal of Development Economics, 132: 57–74. https://doi.org/10.1016/j.jdeveco.2017.12.008.

Goldstein, M and C Udry (2008), "The Profits of Power: Land Rights and Agricultural Investment in Ghana," Journal of Political Economy, 116(6): 981–1022.

Kala, N, C Balboni, and S Bhogale (2023), "Climate Adaptation," VoxDevLit, 7.1(June 2023).

Kebede, B and D J Zizzo (2015), "Social Preferences and Agricultural Innovation: An Experimental Case Study from Ethiopia," World Development, 67: 267–80. https://doi.org/10.1016/j.worlddev.2014.10.022.

Schechter, L (2007), "Theft, Gift-Giving, and Trustworthiness: Honesty Is Its Own Reward in Rural Paraguay," American Economic Review, 97(5): 1560–82.