Do farmland sales markets price in weak property rights enforcement? Evidence from Ukraine
Vasyl Kvartiuk, Thomas Herzfeld
Imperfect land-related institutions may exacerbate welfare uncertainties related to holding land and, as a result, affect land sales prices. The Ukrainian 2021 land reform launched a restricted agricultural land sales market, causing social turbulence as Ukrainians had concerns about property rights enforcement within land transactions. We argue that weak land-related institutions lead to distributional uncertainties and lower sellers’ willingness to pay (WTP) and buyers’ willingness to accept (WTA). Using two unique datasets from Ukraine, we estimate the effect of local institutions on farmland sales prices. We find that worse land-related institutions were associated with lower land sales prices. However, the institutional effect appears to transpire only in areas with relatively competitive land markets. The results call for a holistic approach to liberal reforms with an explicit focus on institutional quality and its promotion.
Event: World Bank Land Conference 2024 - Washington
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