sign that government is not actually fulfilling its functions? Answering this question will require to identify the magnitude of the investment effect of more secure tenure and the channels bringing it about.

In this paper, we conduct such analysis for the specific case of Ethiopia. Conceptually, we build on the model that has been underlying most earlier studies by assuming that rights to transfer land are exogenous whereas tenure security may be enhanced by land-related (visible) investment. A first prediction arising from this is that greater transferability will, in virtually all situations, be associated with higher levels of investment. Second, the endogenous nature of tenure security implies that investment can be undertaken not only to increase productivity but also to enhance tenure security. Thus, the net impact of tenure security on investment is ambiguous; it would be positive if the productivity effect were to outweigh the tenure security effect and negative otherwise. As the relative magnitude of these two effects can not be determined a priori, and would arguably vary over time, space, and even types of investment within the same locality, empirical evidence is needed.

We provide such evidence by drawing on a nationally representative data set from Ethiopia that is both larger and richer than what has been used in the literature. To assess the impact of differences in the relative importance of the tenure security and productivity effect, we use information on whether specific investments were undertaken since 1999. Two types of such investment are distinguished, one of which, planting of trees, is highly visible and can therefore be used to manifest property rights, and another one, establishment or maintenance of terraces, which is more productivity-enhancing and less immediately visible. Tenure security is measured by village-level or individual experience of a land reallocation before 1999 and by households' expectations about future reallocations at the village-level. Transferability is proxied by respondents' subjective assessment of whether they will be able to transfer their land through mortgage or sale.

Our results are in line with the recent literature by confirming that the impact of tenure security varies across types of investment; insecure tenure (as measured by past redistribution) encourages planting of trees but discourages terracing. At the same time, both the perception of future risk of redistribution and lower levels of transferability clearly reduce the propensity to invest, especially in non-visible activities that can enhance future productivity. The effects found are not only highly significant statistically but also of considerable magnitude; eliminating the risk of future redistribution and resolving conflicts over land with local authorities would increase the propensity to invest in terraces by 28%; making land rights fully transferable is predicted to add an additional 38%. The fact that the impact on planting of trees is much smaller (4% and 7%, respectively, for the two types of interventions) suggests that, in addition to limited variation in levels of tenure security, large part of the failure to find a significant impact of tenure security in the literature may have been due to a focus on short-term investments.

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