land rights, their transferability, and matters of land taxation to regional governments (FDRE 1997).<sup>1</sup> As tenure insecurity will be an important determinant of rental decisions, a brief review of regional policies on land redistribution and land rental is in order.

Despite repeated public announcements against land redistribution, regional positions are ambiguous. Proclamations in Amhara and SNNPR explicitly provide for other types of redistribution but make them the responsibility of local communities and require that they be supported by research that it will not lead to land fragmentation and does not adversely affect land productivity. Proclamations everywhere maintain that land rights of those obtaining non-agricultural jobs or otherwise being absent from the village for more than a certain period will fall back to the village.<sup>2</sup> Even with rental now officially allowed (Pender and Fafchamps 2006), regions impose restrictions on the extent of land that can be leased or the duration of rental contracts (Nega, Adenew, and Gebre-Sellasie 2003, Beyene 2004). Oromia and SNNPR allow farmers to rent out up to 50% of their holding and stipulate maximum contract terms of 3 years for traditional and 15 years for modern technology (ONRS 2002; SNNPR 2003). In Amhara where our data was collected, a recent proclamation allows leasing of land for up to 25 years irrespective of the technology used (ANRS 2006) but still leaves large amounts of uncertainty.<sup>3</sup> For example, a clause that would have allowed mortgaging was removed from the draft proclamation before its enactment. More importantly, regulation is silent on whether long-term rental contracts entered into by a person who subsequently finds a non-farm job will have to be honored or not.

The notion that legal provisions lack clarity is supported by survey data. We note that, while the share of households who expect their land holding to be affected by administrative land redistribution or reallocation over the next five years has declined, on average it is still high with 47% over the three rounds. Such fears could reduce investment incentives (Deininger and Jin 2006b) as well as the propensity to rent out land which could be perceived as a signal that the land is no longer needed. Without judicial institutions to interpret regulations or adjudicate in case of dispute, it also implies that land conflicts are frequent and bureaucratic discretion in solving them pervasive (Rahmato 2003).

Partly to reduce such conflicts and respond to widespread tenure insecurity, the government recently launched an ambitious program of land certification that has made considerable progress, covering more than 6 million households by late 2005 in a participatory low-cost process to delineate borders and issue land use certificates (Deininger _et al._ 2007). Evidence on high levels of willingness to pay for land certification (Solomon 2004) suggests that this indeed responds to a farmers’ demand. However, unless

> 1 A new federal rural land administration and use proclamation was enacted in 2005, partly to re-establish consistency. As our data was collected before its enactment, its relevance for or analysis is limited and there is no need for us to analyze its provisions in detail.

> 2 Most regions allow for eminent domain with compensation for land and improvements to establish irrigation. See the Southern Nation, Nationalities and Peoples Region (SNNPR) Amhara, and Oromia (ANRS 2000; ONRS 2002; SNNPR 2003). No clear statement on redistribution is included in Tigray (TNRS 1997).

> 3 Recall that, as all of our data is from before 2005, it will not reflect changes brought about by this new development.

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