Should-Read: Craig Palsson: Small Farms, Large Transaction Costs: Incomplete Property Rights and Structural Change in Haiti

Should-Read: “Incomplete” is, I think, the wrong word here: too many holdup points (and no easy way to disclaim rights to real property) is the problem: Craig Palsson: Small Farms, Large Transaction Costs: Incomplete Property Rights and Structural Change in Haiti: “Developing countries have too many small farms and could grow more if they reorganized their agricultural structure…

…But altering the agricultural structure in developing economies is difficult because incomplete property rights and diffuse ownership lead to high transaction costs. This point is seen in Haiti, where transaction costs were high because of historical property rights institutions and prevented Haiti from adapting to changes in the world economy at the beginning of the 20th century. A simple trade model with migration and transaction costs in the land market can explain much of Haiti’s history. Using new data on land adoption in Haiti from 1928 to 1950, I test the model’s implications of how transaction costs and eliminating migration opportunities affect land adoption. The results are consistent with large transaction costs to acquiring plantation land and imply that good development policy might require violating property rights to achieve the optimal agricultural distribution…