Market Design for Land Trade: Evidence from Uganda and Kenya

Increasing agricultural labor productivity is key to reducing cross country income differences. Recent work suggest that inefficient and fragmented land allocation is an important contributor to low productivity.

 We use a series of lab-in-the-field experiments in Uganda and Kenya to explore whether better designed markets can help farmers to consolidate their land and allocate it more efficiently. We find that (1) unstructured trade has low efficiency. While farmers reap some rewards from land consolidation, they fail sort the most efficient farmers to the best land, and often end up with too much or too little land. (2) a simple market centralization intervention significantly improves outcomes, primarily by allowing farmers to unwind positions with excess land, but without leading to any sorting gains. (3) a more complicated combinatorial auction unlocks sorting gains without exacerbating inequality across farmers. We conclude that unstructured trade cannot solve the land allocation problem, and that market design has significant potential to help, but tailoring the details of the design to the environment and population is important.

Contact : Catherine Guirkinger - catherine.guirkinger@unamur.be
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