Do Good Intentions Make Good Policy?

Abstract

Thin markets and high prices are typical impediments to farmland access. Access is further restricted in South Korea: regulations prohibit nonoperator ownership and most farmland renting. Nonetheless, nominally illegal renting is common, leading to tenure insecurity for tenant farmers. We model the incentive structure of these landlords and tenants. We use an exogenous policy shock and farm-level panel data to uncover the unobserved illegality of rental contracts, estimating farm-level likelihood of illegal tenure. We find 42% of farmers with a high likelihood of illegal tenure. We examine the effect of this on government payments and rental contract terms.