The role of formal and informal institutions in farmland consolidation: The case of Shiga Prefecture, Japan

Abstract

As farmland is not effectively utilized from economic or environmental perspectives, this study proposes an institutional system for coordinating farmland use in Japan, examining the role played by communities. We propose a theoretical and conceptual model to identify the conditions for successful farmland use coordination and classify the various types of farmland consolidation into four simplified models. We compare these models in terms of (1) change in profits from individual to collective farmland use for landowners and cultivators, (2) transaction costs for mobilizing farmland, (3) transaction costs associated with collective action, and (4) the possibility of coordinating the interests of community members. Econometric analysis indicates that the promotion of collective actions increases the likelihood of communities with a high level of social capital to coordinate farmland use, concentrate farmland in the hands of large-scale cultivators, and prevent the abandonment of farmland. Overall, the results of this study point to the importance of social capital accumulation in rural communities to achieve high degrees of land consolidation.