A Profit Function Approach to the Efficiency Aspects of Land Reform in Zimbabwe

The purchase of commercial farm land in Zimbabwe for resettlement has been a factor in government policy since independence in 1980, but from l 980 to 1989 only 52 000 families were relocated. The Land Acquisition Bill of 1992 made compulsory purchase easier and at present the government has announced its intention to considerably increase the rate of resettlement. But Zimbabwe has a serious food security problem and the output effects of land redistribution are a matter of dispute. The World Bank estimate that 3 million hectares of commercial farmland are under-utilized is contested by the Commercial Farmer's Union. Fitting a normalized restricted profit function to the data for the commercial sector allows estimation of the shadow price of commercial farm land. We find that the model suggests that the World Bank is correct, in that the marginal value product of land is negative, meaning that there is under-utilization. However, negative values of capital assets are common when real interest rates are negative, so the result should be treated with some caution. Also, the problem of identifying the unutilized land is not trivial and redistributing intra-marginal land would have output effects.