Tenure Security, Land Markets, and Household Income: Procede and the Impact of the 1992 Reform in Mexico

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In 1992, the Salinas administration launched a major reform liberalizing several aspects of Mexico's ejido sector. The reform is to be understood as a major effort at introducing and enforcing clearly defined property rights in Mexico's agrarian landscape. Compared to the private sector, the ejido sector was characterized by a higher rate of poverty and a higher labor to land ratio. A basic proposition is that weak property rights were an underlying cause of that gap.

As an implementing tool, a program of land rights certification and registration, Procede, was launched in 1993. A key objective of the reform was to improve the efficiency of the ejido factor markets, raise farm productivity, and increase household income. Activation of land markets was instrumental in the short term to that objective while out-migration from ejido communities was seen as an inevitable outcome of the adjustment process. This research analyzes the Procede's impact on the ejidos' land rental markets and on the sources of household income.

The empirical analysis starts by examining how the program was delivered to the ejido communities and its acceptance by the ejidatarios. It then studies participation in land leasing markets and the Procede's influence on the amount of land transacted in the rental market. The impact that the Procede has had on farm, non-farm, and agricultural labor household income is then estimated.

It is found that although the Procede has indeed helped ejido land markets to work better, several institutional factors are still a limiting factor in transferring land from less to more productive farms. Ejido households have began a process of diversification of their income sources as a result of the Procede, signaling that improved tenure security has raised the return to uses of labor off the farm relative to on farm uses. Local agricultural labor markets have become a more important source of income, as well as non-farm employment in non-agricultural activities. Finally, it is found that the criteria followed in delivering the Procede to the ejido communities responded more to the interests of the bureaucracy entrusted with the program than to social welfare concerns.