Participation in Rural Land Rental Markets in Sub‐Saharan Africa: Who Benefits and by How Much? Evidence from Malawi and Zambia

Abstract We use nationally representative household‐level panel survey data in two neighboring countries in Southern Africa—Zambia and Malawi—to characterize the current status of rural land rental market participation by smallholder farmers, and their subsequent welfare impacts. Rural rental market participation is much higher in densely‐populated Malawi than in lower‐density Zambia, reflecting the role of land scarcity in driving rental market development. Consistent with previous literature, we find evidence that rental markets contribute to efficiency gains within the smallholder sector by facilitating the transfer of land from less‐able to more‐able producers, on average, in both countries. Furthermore, we find that rental markets serve to re‐allocate land from relatively land‐rich to land‐poor households. We examine the impacts of participation on a number of welfare outcomes and find evidence for generally positive returns to renting in land in both countries, on average. However, our analysis also indicates that the returns to renting in land vary strongly with scale of production: tenants who produce more have larger returns to renting in, and many of the smaller producers who rent in do so at an economic loss. The impacts of renting out (i.e., participating in markets as landlords) are decidedly more mixed, with overall negative returns to landlords in Malawi and negligible returns to landlords in Zambia. The findings in this article highlight the need for researchers and policymakers in sub‐Saharan Africa to stay attuned to how land rental market participation and its impacts evolve in the near future.