A new scramble for land or an unprecedented opportunity for the rural poor? Distributional consequences of increasing land rents in developing countries

Price induced increases in land rents trigger an increasing incentive for rent-seeking behavior. To analyse distributional and welfare effects of increasing land rents in developing countries, we develop a game theoretic model where a large and heterogeneous group of farmers competes with a small and wealthy elite. The results indicate that only relatively small rent increases benefit the farmers more than the elite. Moreover, political institutions have an ambiguous effect on farmers’ rent share, and may even reduce overall welfare, because they induce wasteful expenditure on rent-seeking.