Land Market Development and Agricultural Production Efficiency in Albania
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We make use of data from the 2005 Albania Living Standard Measurement Survey to investigate the factors
affecting household agriculture efficiency and land market development. To assess the functioning of land rental
markets and explore efficiency- and equity impacts of land rental, we use a model of producers who differ in
endowments and skills and who face imperfect labor markets and transaction costs. The empirical evidence, of a
stochastic frontier estimate, shows that productivity is low and most farms are inefficiently utilized. The average level
of agriculture efficiency among rural household is very less than 30% but household that rent in land are more efficient.
However, results from a probit regression on rental market participation shows that rental market helps to transfer land
to more efficient producers. However, several constraints in credit market, input, labor, and the lack of irrigation are
outweighing the productivity advantage of the tenants. In addition to that, land market development is delayed by
remaining restrictions and high transaction cost. To overcome these limitations as well as inadequate system of land
title registration, household are using informal land transactions, such as inheritance, in order to increase farming
efficiency.