Land Restitution in Colombia - Prospects of Increasing Agricultural Productivity

Abstract: This study concerns the prospects of the Victims and Land Restitution Law in Colombia, of successfully contribution in increasing agricultural productivity, through a restitution of land to the victims of the country’s armed conflict. According to the theory of Giovanni Andrea Cornia very small-sized farms and large-sized farms have a lower relative productivity than middle-sized farms, due to the formers’ lesser ability of absorbing the excess labour supply caused by the strong incentives to the large landowners to keep land unutilized. Distributing land from the large farms to the very small and middle-sized farms would serve the comparative advantages in labour, thus increase agricultural efficiency. The model of induced innovation explains how an agricultural system will respond to changes in production factor endowments and adjust the combination of production factors in the production as well as promoting technical innovation in the new production. The model also explains how transaction costs and collective actions will hinder the system from changing its combination of production factors and instead remain in an inefficient agricultural production. Since the current agricultural system is very dependent of its colonial history and agricultural policies of the past it is crucial to analyse the past of those policies to determine the prospects of the Victims Law contributing to the increased agricultural efficiency today. In this study I have combined the theories of Cornia and the model of induced innovation and applied it of the previous efforts of increasing agricultural productivity though land distribution, showing that the agricultural production during the time of those efforts did have a lower ability of absorbing labour than the comparative advantage of the country would suggest, and showing the transaction costs and collective actions responsible for the country not responding to the production factors endowments. These transaction costs were: rentier capitalism, excluding credit market conditions, problems obtaining land titles, a biased political power, international price competition and excluding agricultural conditions such as the biased criteria for producers receiving government support. These transaction costs and collective actions still characterize the agricultural system of Colombia and has the potential of threatening the Victims Law in contributing to increased agricultural efficiency. Policy suggestions for the Colombian government are: strengthening the politicisation of the poor farmers and the labour movement, revaluating the criteria for producers receiving government support towards sustainable crop production, expand market credit access for poor farmers, establish a hedging system from international price distortions and keep government finances stable to reduce rentier capitalism.