Albania, limited attractiveness of agriculture as evidenced by high rates of out-migration, low investment, and constraints on credit suggest that the prospect for such specialization in the medium term may be low.

Even if it does not affect productivity on cultivated plots, fragmentation may lead to crop abandonment if plots are be too small for economically viable cultivation, their distance from the owner‟s homestead makes transport costs prohibitively high or if limited access to capital makes it uneconomical for owners to use their plots. One-time interventions to consolidate land holdings may be well suited to address the first constraint: if land is idle because holding sizes are too small, publicly supported programs to overcome the collective action problems that normally impede assembly of large contiguous tracts of land. If, on the other hand, owners‟ failure to cultivate land originates not in structural impediments (such as size) but imperfections to the functioning of land markets, efforts to identify and, as much as possible, address land market failures may have larger effects on productivity.

Is cropland abandonment important in practice? Data suggest that large parts of Albania‟s productive land are left idle, often for long periods of time. Some 10% of productive land (by 18% of producers) was uncultivated for reasons other than crop rotation at the time of our survey; most of it had been abandoned for at least 5 years.<sup>2</sup> In the vast majority of cases, ill-functioning land markets rather than uneconomically small plot sizes seem to be at the root of this phenomenon: less than 0.5% of respondents indicate that they leave land fallow because plot sizes are too small. Instead, lack of capital and inconvenient plot locations -both of about equal importance- are cited as reasons for non-use of productive crop land. Land is more likely to be abandoned in areas with generally favorable conditions and by households who, as a result of relying on non-agricultural income, are more affluent than the average. Market-based transfers of such land would thus appear to offer considerable unexploited scope for gains in efficiency and equity.

Comparing the magnitude of cropland abandonment to what is being transferred through land markets is instructive. Land rental markets transfer land to more efficient producers but the volume of these transfers is limited, amounting to less than one-third of the area left idle in 2005. Also, most of them are for a short duration only, pointing towards market imperfections that could be due to high transaction costs of dealing with land. The literature points towards three factors that may underlie this failure to fully realize the potential for efficiency-enhancing land transfers (World Bank 2006). First, weak land governance increases the cost of transferring land up to a point where such transactions are no longer desirable. Key reasons include (i) the fact that first registration, a precondition for formal land transfers, remains incomplete; (ii) the high transaction cost arising from the fragmented and ill-coordinated nature of land administration institutions and high levels of operational inefficiency in the land registry; (iii) a lack of standard forms and procedures; and (iv) a complex and ill-understood legal framework with at times

> 2 We arrive at the 10% figure by subtracting land that is unused because of low soil quality, from the 12% of land that remained unused overall.

2