Do African Land Rental Markets Reveal Economies of Scale? Evidence from Malawi, Nigeria, and Uganda

Abstract of the Paper

Do economies of scale create an endogenous tendency toward farm consolidation in African agriculture? We address this question using land rental decisions rather than estimated production functions. If larger farms have systematically higher returns to operational expansion, relatively land-rich households should be more likely to rent in land. We test this prediction using nationally representative household panels from Malawi, Nigeria, and Uganda. Repeated observations are used to construct upper-envelope landownership measures and diagnostics for substantial ownership-reporting instability, while dynamic correlated-random-effects models identify how tenant participation varies with households’ ownership position within local land markets. Across all three countries, relatively land-poor households are consistently more likely to rent in land, conditional on productive endowments, previous participation, and reporting reliability. Nonlinear specifications confirm that tenant participation declines from the bottom toward the top of the local ownership distribution, although the shape differs across countries. The revealed direction of operational adjustment provides little evidence that land rental markets generate endogenous consolidation toward larger farms. Instead, rental markets primarily reallocate land toward relatively land-scarce households, suggesting that rural structural transformation need not operate through progressive enlargement of household farms.