Can rainfall shocks enhance access to rented land? Evidence from Malawi

This study investigates the spatial downside and upside rainfall shock effects on tenant household renting behavior and access to rented land in the short-term and medium-term. We model the tenant households' demand decisions within the state-contingent framework with renting-in of land as a risky input choice. Our data are a 3-year balanced household panel, combined with the corresponding seasonal district-wise rainfall shock data across regional agro-ecological zones in Malawi. Using the correlated and dynamic random effects panel probit and Tobit models that control for unobserved heterogeneity, spatial heterogeneities were revealed. Land rental markets were found to be more active in the Central Region of Malawi with intermediate population density. The 1-year and 2-year lagged downside rainfall shocks enhanced tenant households' land access. For the more land constrained Southern Region of Malawi, with less prevalence of land rental markets, the 2-year lagged downside rainfall shock is associated with less access to rented land. The revealed dynamic and spatial effects of covariate rainfall shocks on land rental market activity call for further studies on how policies could facilitate rental markets to enhance land-use efficiency and land access for the most land-constrained households in Malawi.