Increasing Natural Resource Rents from Farmland: A Curse or a Blessing for the Rural Poor?

The literature on the resource curse suggests that countries with large natural resource rents and weak institutions may experience rent seeking conflicts among different groups, potentially resulting in high inequality and welfare losses. While agricultural land has so far been categorized as a diffuse resource with low economic value, this categorization may no longer be appropriate, because demand for land is currently on the rise, and may continue to increase in the future. This study presents and discusses recent theoretical and empirical approaches to analyzing the effects of high-value agricultural land on rent seeking and rent distribution. Results suggest that the potential for small scale farmers to organize and obtain political power determines the extent of rent seeking and rent distribution, and that while more democratic institutions may increase the share of rents going to the farmers, they may have adverse welfare effects, because they may increase the competition for rents among groups, and hence the amount of resources spent on rent seeking.