Land registration, economic development, and poverty reduction

1
Land registration, economic development, and
poverty reduction

• Gershon Feder

2
Motivation

• Recent emphasis on institutions
• Importance from cross-country, country- and
  firm-level studies
• Land real estate as one of the most important
  assets
• Differences in mortgage debt/GDP (58 US 14
  LAC, 11 MNA 22 Asia)
• Property rights to land as a key development
  issue
• Evolution of property rights institutions
• Recording systems with a very long history
• Land administration
• Demarcation survey
• Registration record keeping
• Adjudication of rights conflict resolution
• Land management
• Objective of paper
• Identification of channels for impact under ideal
  circumstances
• Limitations in real world settings
• Review of evidence on impacts of land
  registration systems
• Implications for research policy

3
Motivation

• Recent emphasis on institutions
• Importance from cross-country, country- and
  firm-level studies
• Land real estate as one of the most important
  assets
• Differences in mortgage debt/GDP (58 US 14
  LAC, 11 MNA 22 Asia)
• Property rights to land as a key development
  issue
• Evolution of property rights institutions
• Recording systems with a very long history
• Land administration
• Demarcation survey
• Registration record keeping
• Adjudication of rights conflict resolution
• Land management
• Objective of paper
• Identification of channels for impact under ideal
  circumstances
• Limitations in real world settings
• Review of evidence on impacts of land
  registration systems
• Implications for research policy

4
Motivation

• Recent emphasis on institutions
• Importance from cross-country, country- and
  firm-level studies
• Land real estate as one of the most important
  assets
• Differences in mortgage debt/GDP (58 US 14
  LAC, 11 MNA 22 Asia)
• Property rights to land as a key development
  issue
• Evolution of property rights institutions
• Recording systems with a very long history
• Land administration
• Demarcation survey
• Registration record keeping
• Adjudication of rights conflict resolution
• Land management
• Objective of paper
• Identification of channels for impact under ideal
  circumstances
• Limitations in real world settings
• Review of evidence on impacts of land
  registration systems
• Implications for research policy

5
The role of the state

• Definition and enforcement of property rights
• Reflects broader social consensus
• Draws on courts and judicial system in general
• Can reduce overspending by individuals (fences)
• Provision of information on land ownership
• Ensure validity of info and avoid duplication of
  effort
• Avoid costly searches by interested parties
• Reduce scope for informational asymmetries that
  increase transaction cost

6
The role of the state

• Definition and enforcement of property rights
• Reflects broader social consensus
• Draws on courts and judicial system in general
• Can reduce overspending by individuals (fences)
• Provision of information on land ownership
• Ensure validity of info and avoid duplication of
  effort
• Avoid costly searches by interested parties
• Reduce scope for informational asymmetries that
  increase transaction cost

7
Channels for property rights impact

• Improved tenure security higher investment
• Less unproductive spending on securing rights
  disputes (courts)
• Lower expropriation risk leads to more
  land-attached investment
• Increase in net worth affects other economic
  decisions (incl. gender)
• Efficiency-enhancing land transactions
• Renting can entail risk to ownership
• Government interprets it as signal that land no
  longer needed
• Tenant wont return at end of contract period
• Public information reduces this risk and thus
  transaction cost
• Similar reduction of asymmetric information for
  sales transactions
• Use of land as collateral for credit
• Characteristics make land an ideal collateral to
  reduce credit rationing
• Reliable information improves scope for using
  this
• But other conditions will need to be satisfied

8
Channels for property rights impact

• Improved tenure security higher investment
• Less unproductive spending on securing rights
  disputes (courts)
• Lower expropriation risk leads to more
  land-attached investment
• Increase in net worth affects other economic
  decisions (incl. gender)
• Efficiency-enhancing land transactions
• Renting can entail risk to ownership
• Government interprets it as signal that land no
  longer needed
• Tenant wont return at end of contract period
• Public information reduces this risk and thus
  transaction cost
• Similar reduction of asymmetric information for
  sales transactions
• Use of land as collateral for credit
• Characteristics make land an ideal collateral to
  reduce credit rationing
• Reliable information improves scope for using
  this
• But other conditions will need to be satisfied

9
Channels for property rights impact

• Improved tenure security higher investment
• Less unproductive spending on securing rights
  disputes (courts)
• Lower expropriation risk leads to more
  land-attached investment
• Increase in net worth affects other economic
  decisions (incl. gender)
• Efficiency-enhancing land transactions
• Renting can entail risk to ownership
• Government interprets it as signal that land no
  longer needed
• Tenant wont return at end of contract period
• Public information reduces this risk and thus
  transaction cost
• Similar reduction of asymmetric information for
  sales transactions
• Use of land as collateral for credit
• Characteristics make land an ideal collateral to
  reduce credit rationing
• Reliable information improves scope for using
  this
• But other conditions will need to be satisfied

10
Potential limitations I

• Weak or absent state institutions for enforcement
  of rights
• Inability to enforce rights against individuals
  or the state
• States commitment to desist from expropriation
  not credible
• Inability to prevent opportunistic behavior by
  individual parties
• Potentially dangerous if existing institutions
  are displaced
• Corruption bad governance undermine registry
  info
• Asymmetric access to information facilitates land
  grabs
• Neglect and de facto elimination of secondary
  rights
• Fraudulent records, corruption in registry
  introduce ambiguity
• Poor will be adversely affected suffer most
• Relative land abundance
• Neglect of the truly scarce factor makes
  registration irrelevant at best
• Limited (or negative) impact on investment
• Increased rather than reduced transaction cost
  through a parallel system
• Registration of group rights can avoid this if
• Membership management structure clearly defined
  and transparent
• Options for transition (e.g. via majority vote)
  available

11
Potential limitations I

• Weak or absent state institutions for enforcement
  of rights
• Inability to enforce rights against individuals
  or the state
• States commitment to desist from expropriation
  not credible
• Inability to prevent opportunistic behavior by
  individual parties
• Potentially dangerous if existing institutions
  are displaced
• Corruption bad governance undermine registry
  info
• Asymmetric access to information facilitates land
  grabs
• Neglect and de facto elimination of secondary
  rights
• Fraudulent records, corruption in registry
  introduce ambiguity
• Poor will be adversely affected suffer most
• Relative land abundance
• Neglect of the truly scarce factor makes
  registration irrelevant at best
• Limited (or negative) impact on investment
• Increased rather than reduced transaction cost
  through a parallel system
• Registration of group rights can avoid this if
• Membership management structure clearly defined
  and transparent
• Options for transition (e.g. via majority vote)
  available

12
Potential limitations I

• Weak or absent state institutions for enforcement
  of rights
• Inability to enforce rights against individuals
  or the state
• States commitment to desist from expropriation
  not credible
• Inability to prevent opportunistic behavior by
  individual parties
• Potentially dangerous if existing institutions
  are displaced
• Corruption bad governance undermine registry
  info
• Asymmetric access to information facilitates land
  grabs
• Neglect and de facto elimination of secondary
  rights
• Fraudulent records, corruption in registry
  introduce ambiguity
• Poor will be adversely affected suffer most
• Relative land abundance
• Neglect of the truly scarce factor makes
  registration irrelevant at best
• Limited (or negative) impact on investment
• Increased rather than reduced transaction cost
  through a parallel system
• Registration of group rights can avoid this if
• Membership management structure clearly defined
  and transparent
• Options for transition (e.g. via majority vote)
  available

13
Potential limitations II

• Market imperfections lack of liquidity
• Credibility of liquidation threat lack of
  viable projects in poor neighborhoods
• Risk rationing fear of loss of collateral
• Access to information land speculation
• Relevance cost-effectiveness of first
  registration
• High cost due to institutional inefficiency or
  overdone survey standards
• Nature of rights registered (e.g. tenants in
  Uganda)
• Range of costs from US 1 to gt US 60 per
  parcel standardization needed
• Reversion to informality due to follow-up
  registration cost
• Deed vs. title registration systems State
  guarantee cost
• Transfer taxes registry overheads
• Cost gt 5 of land value in 53 of countries gt
  10 in 24
• Led to semi-formal systems in some cases

14
Potential limitations II

• Market imperfections lack of liquidity
• Credibility of liquidation threat lack of
  viable projects in poor neighborhoods
• Risk rationing fear of loss of collateral
• Access to information land speculation
• Relevance cost-effectiveness of first
  registration
• High cost due to institutional inefficiency or
  overdone survey standards
• Nature of rights registered (e.g. tenants in
  Uganda)
• Range of costs from US 1 to gt US 60 per
  parcel standardization needed
• Reversion to informality due to follow-up
  registration cost
• Deed vs. title registration systems State
  guarantee cost
• Transfer taxes registry overheads
• Cost gt 5 of land value in 53 of countries gt
  10 in 24
• Led to semi-formal systems in some cases

15
Potential limitations II

• Market imperfections lack of liquidity
• Credibility of liquidation threat lack of
  viable projects in poor neighborhoods
• Risk rationing fear of loss of collateral
• Access to information land speculation
• Relevance cost-effectiveness of first
  registration
• High cost due to institutional inefficiency or
  overdone survey standards
• Nature of rights registered (e.g. tenants in
  Uganda)
• Range of costs from US 1 to gt US 60 per
  parcel standardization needed
• Reversion to informality due to follow-up
  registration cost
• Deed vs. title registration systems State
  guarantee cost
• Transfer taxes registry overheads
• Cost gt 5 of land value in 53 of countries gt
  10 in 24
• Led to semi-formal systems in some cases

16
Evidence on impacts I

• Governance admin. efficiency
• Legal change improved scope for enforcement in
  democratic settings in China
• Impact on beneficiaries attitudes and beliefs in
  Buenos Aires
• Perceived threat of uncompensated expropriation
  reduced in Ethiopia
• Land-related investment
• Doubling of likelihood of soil conservation in
  Uganda
• House renovations standards in urban
  Peru/Argentina
• Higher level of perennials off-farm
  participation in Vietnam
• More investment with high marginal returns for
  full title in Nicaragua
• Higher investment in Ethiopia shortly after
  certification
• Enforcement effort gender equality
• Labor market participation due to less need to
  guard house in Peru
• Lower fertility due to female empowerment via
  titling
• More spending on education in Buenos Aires

17
Evidence on impacts I

• Governance admin. efficiency
• Legal change improved scope for enforcement in
  democratic settings in China
• Impact on beneficiaries attitudes and beliefs in
  Buenos Aires
• Perceived threat of uncompensated expropriation
  reduced in Ethiopia
• Land-related investment
• Doubling of likelihood of soil conservation in
  Uganda
• House renovations standards in urban
  Peru/Argentina
• Higher level of perennials off-farm
  participation in Vietnam
• More investment with high marginal returns for
  full title in Nicaragua
• Higher investment in Ethiopia shortly after
  certification
• Enforcement effort gender equality
• Labor market participation due to less need to
  guard house in Peru
• Lower fertility due to female empowerment via
  titling
• More spending on education in Buenos Aires

18
Evidence on impacts I

• Governance admin. efficiency
• Legal change improved scope for enforcement in
  democratic settings in China
• Impact on beneficiaries attitudes and beliefs in
  Buenos Aires
• Perceived threat of uncompensated expropriation
  reduced in Ethiopia
• Land-related investment
• Doubling of likelihood of soil conservation in
  Uganda
• House renovations standards in urban
  Peru/Argentina
• Higher level of perennials off-farm
  participation in Vietnam
• More investment with high marginal returns for
  full title in Nicaragua
• Higher investment in Ethiopia shortly after
  certification
• Enforcement effort gender equality
• Labor market participation due to less need to
  guard house in Peru
• Lower fertility due to female empowerment via
  titling
• More spending on education in Buenos Aires

19
Evidence on impacts II

• Land values
• Capture present value of benefit stream from land
• 23 self-assessed in Ecuador 30 in Nicaragua,
  58 in Philippines 73 in Indonesia but only 6
  in Madagascar
• Land market operation
• Tendency to rent out in Guatemala (63 w. full
  security)
• Higher propensity to rent out to non-relatives in
  Vietnam
• Land market participation by females in Ethiopia
• Use of land as collateral for credit
• Significant effects in Paraguay only for larger
  producers
• Still considerable rationing in Peru
  (foreclosure)
• Signaling in Thailand
• No effect in Buenos Aires
• Credit-related benefits in developing countries
  may be overstated

20
Evidence on impacts II

• Land values
• Capture present value of benefit stream from land
• 23 self-assessed in Ecuador 30 in Nicaragua,
  58 in Philippines 73 in Indonesia but only 6
  in Madagascar
• Land market operation
• Tendency to rent out in Guatemala (63 w. full
  security)
• Higher propensity to rent out to non-relatives in
  Vietnam
• Land market participation by females in Ethiopia
• Use of land as collateral for credit
• Significant effects in Paraguay only for larger
  producers
• Still considerable rationing in Peru
  (foreclosure)
• Signaling in Thailand
• No effect in Buenos Aires
• Credit-related benefits in developing countries
  may be overstated

21
Evidence on impacts II

• Land values
• Capture present value of benefit stream from land
• 23 self-assessed in Ecuador 30 in Nicaragua,
  58 in Philippines 73 in Indonesia but only 6
  in Madagascar
• Land market operation
• Tendency to rent out in Guatemala (63 w. full
  security)
• Higher propensity to rent out to non-relatives in
  Vietnam
• Land market participation by females in Ethiopia
• Use of land as collateral for credit
• Significant effects in Paraguay only for larger
  producers
• Still considerable rationing in Peru
  (foreclosure)
• Signaling in Thailand
• No effect in Buenos Aires
• Credit-related benefits in developing countries
  may be overstated

22
Conclusion

• Main findings
• Strong tenure security investment effects under
  appropriate circumstances
• Some effect on land markets, especially rental
• Credit impact in developing countries more
  limited than often believed
• Gaps in the literature
• Strong emphasis on rural, individual (rather than
  group) rights
• Little study of interactions (upgrading, legal
  knowledge, biz training, LUP)
• Costs rarely compared to benefits
• Limited emphasis on governance, land in post
  conflict, state land management
• Scope for using ongoing interventions to assess
  
• (Credit) effects in urban areas
• Options for financing cost recovery by local
  governments (bonds)
• Productivity/welfare/diversification effect of
  market activation
• Impact dynamics of group vs. individual rights
• Extreme positions on either side not warranted

23
Conclusion

• Main findings
• Strong tenure security investment effects under
  appropriate circumstances
• Some effect on land markets, especially rental
• Credit impact in developing countries more
  limited than often believed
• Gaps in the literature
• Strong emphasis on rural, individual (rather than
  group) rights
• Little study of interactions (upgrading, legal
  knowledge, biz training, LUP)
• Costs rarely compared to benefits
• Limited emphasis on governance, land in post
  conflict, state land management
• Scope for using ongoing interventions to assess
  
• (Credit) effects in urban areas
• Options for financing cost recovery by local
  governments (bonds)
• Productivity/welfare/diversification effect of
  market activation
• Impact dynamics of group vs. individual rights
• Extreme positions on either side not warranted

24
Conclusion

• Main findings
• Strong tenure security investment effects under
  appropriate circumstances
• Some effect on land markets, especially rental
• Credit impact in developing countries more
  limited than often believed
• Gaps in the literature
• Strong emphasis on rural, individual (rather than
  group) rights
• Little study of interactions (upgrading, legal
  knowledge, biz training, LUP)
• Costs rarely compared to benefits
• Limited emphasis on governance, land in post
  conflict, state land management
• Scope for using ongoing interventions to assess
  
• (Credit) effects in urban areas
• Options for financing cost recovery by local
  governments (bonds)
• Productivity/welfare/diversification effect of
  market activation
• Impact dynamics of group vs. individual rights
• Extreme positions on either side not warranted