Institutions, sustainable land use and consumer welfare: The case of forest and grazing lands in Northern Ethiopia

Land is an essential factor of production. Institutions that govern its efficient use determine the sustainability of this essential resource. In Ethiopia all land is publicly owned. Such an institutional setting is said to have resulted in major degradation of Ethiopia’s land resources and dissipation of the resource rent. An alternative to this is assigning private property institution.

In this paper, we examine consumer welfare effects of change in institutional setting to communal forest and grazing lands using a dataset covering 200 cross-section households in Northern Ethiopia. Findings suggest that changing the current institutional setting could indeed be welfare reducing.