high levels of informality where the majority of land transactions remains off the register, in line with what is found by recent studies (World Bank 2006).

In many instances of post-communist transition, a key reason for land holdings to be fragmented is that households received different types of land (cropland, pastures, orchards, vineyards) or land with different levels of quality or associated infrastructure (Tanaka 2007). Data on land use suggests that this may be the case in Albania as well; land holdings are made up of irrigated and rainfed fields for annuals (close to 0.3 ha each), rainfed and irrigated orchards (520 and 180 m<sup>2</sup> , respectively), and pastures (900 m<sup>2</sup> on average). Not all the available area is cultivated or transferred through markets; indeed some 18% of households, most of them in the country‟s coastal and central parts, leave land fallow for reasons unrelated to productivity.<sup>6</sup> With some 12% of the total (from 0.16 ha in coastal to 0.04 ha in mountain areas), the area affected is not negligible. Some two thirds of this has been fallow for 5 years or more, pointing towards potentially far-reaching implications for agricultural incomes overall. Most notably, the amount of land left idle is about three times what has been transferred through land rental markets in 2005.

In line with what was discussed earlier, the value of agricultural output, from crops and livestock together, amounts to approximately $1,000 per household, slightly less than half (48%) of which comes from livestock production. Magnitude and composition of agricultural income vary across regions, with the highest levels ($ 1,318, about two-thirds of which from crop agriculture) in the coast and the lowest ($ 850, some two-thirds of which from livestock) in the mountains. About 21% of producers have access to crop extension and about 28% to veterinary services. At the community level, some 35% of households accessed credit and about 20% had a migrant member. While the latter figure varies surprisingly little across regions, there are considerable differences in the implications in terms of labor availability; more than 50% of communities in the coast, compared to 23% in the mountains, indicate that seasonal labor shortages constrain agricultural activity.

# **3. Analytical issues and empirical approach**

As a basis for our empirical analysis, we discuss the institutional analysis of land fragmentation and design, justification, and potential benefits from consolidation programs. We introduce the empirical specification to analyze the impact of fragmentation on technical efficiency through a stochastic frontier and a friction model for participation in land rental and sales markets.

# **3.1 Does land fragmentation reduce efficiency of agricultural production?**

Determinants and productivity impacts of fragmentation have long been discussed in the literature. Key disadvantages of fragmentation include the need for higher physical inputs due to increased labor and travel

> 6 The survey includes information about the reason for leaving land idle and the figures in the text exclude any fallowing related to crop rotation.

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