Rehabilitation myths? How transaction costs reduce farmer welfare after land acquisition

Abstract

In this article, we show how transaction costs lead to farmer marginalization as displaced farmers embark on the process of acquiring new land. Existing studies have focused on the links between monetary compensation and landowners’ investment decisions, but before new land is acquired. However, the postdisplacement scenario and the investment decisions of land owners to restore income have not been carefully examined. We use a transaction cost framework to suggest that local specificities related to land characteristics, uncertainties in search for alternatives and information constraints may impose high non-monetary costs on displaced farmers and force them to settle for inferior new land. The article concludes with a preliminary assessment of whether the newly enacted land acquisition framework, the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (RFCTLARR) Act 2013, promises to minimize these ex-post transaction costs that farmers face.