1. LEIBNIZ INSTITUTE OF AGRICULTURAL DEVELOPMENT IN TRANSITION ECONOMIES
Land and Poverty Conference 2016| March 15, 2016

2. Vasyl Kvartiuk, Martin Petrick IAMO
Land Reform in Transition: The Effect on Kazakhstan‘s Land and Credit Markets
Vasyl Kvartiuk, Martin Petrick
IAMO
Land and Poverty Conference 2016 | March15, 2016 | Washington DC, USA

3. Introduction Land Reforms in the CIS:
Between 1990 and million ha were transfered in private ownership;
However, the extent of reforms varies greatly:
Land sales are legally limited: Ukraine, Belarus;
Land sales legally allowed: Moldova, Kazakhstan;
Kazakhstan implemented a set of liberal land reforms in

4. Introduction The aspirations of liberal land reforms:
Efficiency improvements;
Better access to land for the poor.
However, transition context is known for:
Transaction costs;
Risk associated with vague property rights;
Thin land markets
Land rental markets may initiate land flows and provide access to land for undercapitalized farmers (Sadoulet, Murgai & Janvry, 2001; Deininger & Binswanger, 2001).

5. Introduction
Kazakhstan is an interesting natural experiment to observe the effect of reforms on land rental and credit markets.
Law on Land 1995:
„Conditional land shares“;
Short-term and permanent tenancy;
Sub-leasing was possible.
Land Code 2003 (implemented in 2005)
Short-term and permanent tenancy and private ownership recognized;
Sub-leasing was outlawed;
No land distribution.
Individual farms, households, and corporate farms co-exist;

6. Research Questions
How did land reforms affect land rental markets? What are the implications of the reform for credit markets?

7. Theory
Modelling farmers’ decisions to participate in land rental market based on Yao (2000), Vranken & Swinnen (2006), and Deininger & Jin (2005):
Utility maximization framework;
A farm is more likely to rent in if
Land endowment is smaller;
Rental payments and transaction costs are lower;
Marginal cost of labor supervision is lower and credit constraint less strict;
Marginal productivity of land is high (agricultural ability, nature of agriculture, climatic conditions, etc.)

8. Theory
Credit-rationing framework (Boucher et al. (2009); Petrick, Oshakbaev, & Wandel (2014))
Quantity rationing (collateral or cash flow constraints);
Price rationing (interest rate);
Transaction cost rationing (bureaucratic procedures);
Risk rationing (riskiness of returns).
One of central reform aspirations: using owned land as a collateral for credit access.

9. Empirical Strategy Data:
Two waves of survey conducted in 2003 by WB and in 2012 by IAMO;
Akmola and Almaty region;
In total 600 households, 341 individual farms and 69 commercial farms were interviewed;
Logit, Tobit models along with descriptive statistics and non-parametric regressions.

10. Results: Land rental markets
Meaning of land ownership in 2002:
Conditional land shares;
Permanent land rental;
Meaning of land ownership in 2011:
Full ownership (permanent land rental automatically recognized as ownership after reforms);
Conditional land shares as shares in agricultural enterprises;
Permanent land rental.

11. Dynamics of farms distribution by tenancy status and farm type
Individual Farms
Agricultural Enterprises
Households
Almaty region
Akmola region
A – landless who don’t rent in;
B – landless who rent in;
C – own land and don’t rent in or out;
D – own land and rent in;
E – renting in and out;
F – own land and rent out.

12. Results: Land rental markets
Who do individual farms rent in land from?

13. Results: Land rental markets
Lowess smoothers of the probability of renting in for individual farms.
Source: Authors’ elaboration based on World Bank and IAMO Surveys.

14. Results: Land rental markets
Renting in behavior by individual farms
Logit, Dummy for renting in (odds ratios)
Tobit
Thousand ha rented in
AGE (manager’s age)
1.000 (0.994)
1.007 (0.781)
4.060 (0.877)
(0.456)
EDU (manager’s education, 1 to 8 scale)
1.487** (0.019)
1.790*** (0.006)
** (0.013)
** (0.013)
LAND (owned land, ha)
0.999** (0.028)
0.991 *** (0.000)
(0.263)
-6.704*** (0.001)
LAND2
1.000 (0.257)
1.000 (0.285)
0.000 (0.732)
0.000 (0.989)
REGION (Almaty – 1, Akmola – 0)
0.163*** (0.001)
0.058*** (0.000)
*** (0.006)
*** (0.000)
YEAR (2011 – 1, 2002 – 0)
2.815* (0.072)
5.430 (0.654)
** (0.046)
(0.565)
LIVESTOCK (livestock index)
1.005** (0.017)
1.007*** (0.007)
3.779*** (0.001)
5.810*** (0.001)
ASSETS (non land assets, bln KZT)
0.999 (0.776)
1.000 (0.728)
0.000 (0.963)
0.001 (0.189)
AGRIEDU (special ag. education – 1, none – 0)
0.613 (0.232)
0.759 (0.539)
(0.110)
(0.348)
FARMAGE (number of years since establishment)
1.035 (0.439)
1.020 (0.669)
(0.441)
(0.760)
COOP (joint activities with other farms)
0.818 (0.725)
1.094 (0.878)
(0.202)
(0.234)
PROFIT_HA (profit per ha)
1.000 (0.810)
1.000 (0.423)
(0.300)
(0.861)
YEAR*LAND
1.029*** (0.000)
23.594*** (0.001)
YEAR*EDU
0.579 (0.350)
(0.337) …
Observations
267

15. Results: Credit markets
Lowess smoothers of a probability of making investments using loans for individual farms.
Source: Authors’ elaboration based on World Bank and IAMO Surveys.

16. Results: Credit markets
Dynamics of perceived credit rationing over a decade.
Source: Author’s elaboration based on World Bank and IAMO Surveys.
Individual farms

17. Results: Credit markets
Making investments using loans by individual farms
Logit, Dummy for having made investments (odds ratios)
AGE (manager’s age)
0.941* (0.066)
0.944* (0.057)
EDU (manager’s education, 1 to 8 scale)
1.190 (0.471)
1.124 (0.597)
LAND (owned land, ha)
1.000 (0.965)
0.999 (0.311)
LAND2
1.000 (0.766)
1.000 (0.562)
REGION (Almaty – 1, Akmola – 0)
0.769 (0.433)
0.587 (0.431)
YEAR (2011 – 1, 2002 – 0)
7.758*** (0.006)
(0.139)
LIVESTOCK (livestock index)
1.002* (0.075)
1.007** (0.020)
ASSETS (non land assets, bln KZT)
1.000 (0.539)
1.000* (0.089)
AGRIEDU (special ag. education – 1, none – 0)
1.093 (0.640)
1.218 (0.701)
FARMAGE (number of years since establishment)
1.000 (0.141)
1.000 (0.431)
COOP (joint activities with other farms)
0.825 (0.739)
0.903 (0.878)
PROFIT_HA (profit per ha)
1.000 (0.646)
1.000 (0.307)
YEAR*LAND
1.005 (0.266)
YEAR*ASSETS
1.000*** (0.006)
YEAR*LIVESTOCK
0.977** (0.033)
Constant
0.093 (0.280)
0.083 (0.232)
Observations
267

18. Conclusion
Reforms were a step in the right direction but not sufficient;
Individual farms tend to rent in more land after the Reforms (more so in Akmola region because of nature of agriculture);
Connection between the Reforms and flows of land to more educated producers is vague;
Land as a collateral did not improve access to credit market;

19. Implications
In transition context land rental markets can have important efficiency and equity implications;
Land sales markets should be stimulated (higher rent, reduced bureaucratic burden, etc.)
Credit markets may need to be stimulated by other instruments;

20. Thank you for your attention!
Land Reform in Transition: The Effect on Kazakhstan‘s Land and Credit Markets
Thank you for your attention!
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