Tenure security, investment and the productivity of agricultural farms in the communal area of Kavango West Region of Namibia: Any evidence of causality

The study determines whether there are causal influences amongst the decision to apply for leasehold land right, investment, and livestock farm productivity in the Kavango West Region of Namibia. Various econometrics models have been used to model these relationships in the literature. However, there is a growing concern that methods which do not explicitly account for the endogeneity of regressors and which are used to investigate the relationship between property rights and the economic activities on agricultural farms often produce bias estimates that are inefficient and inconsistent. This study applied an instrumental variable (IV) regression to a survey data of 510 farmers to correct for endogeneity. A test of endogeneity of tenure security, investment, and farm productivity in the various models show that tenure security is exogenous to farm investment decision and farm productivity. On the other hand, farm investment decision was found to be exogenous to farm productivity, which implies that farmers make investment decisions given a secure tenure right that enhances their productivity on the farm. Overall, there was no evidence to support reverse causality in any of the tests. These findings highlight the importance of secure property rights as being a stimulus for increased agricultural investment and productivity. Key words: Property right, tenure security, endogenous, exogenous, investment.