Tenure Insecurity, Adverse Selection, and Liquidity in Rural Land Markets
AbstractA theory of land market activity is developed for settings where there is uncertainty and private information about the security of land tenure. Land sellers match with buyers in a competitive search environment, and an illiquid land market emerges as a screening mechanism. As a consequence, adverse selection and an insecure system of property rights stifle land market transactions. The implications of the theory are tested using household level data from Indonesia. As predicted, formally titled land is more liquid than untitled land in the sense that ownership rights are more readily transferable. Additional implications of the theory are verified empirically by constructing a proxy variable for land tenure security and studying the differences between markets for unregistered land across Indonesian provinces. Regional land market activity is appropriately linked to the distribution of the proxy variable.
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Bibliographic InfoPaper provided by Queen's University, Department of Economics in its series Working Papers with number 1269.
Length: 57 pages
Date of creation: Apr 2011
Date of revision:
Competitive Search; Land Markets; Tenure Security; Liquidity;
Find related papers by JEL classification:
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
This paper has been announced in the following NEP Reports:
- NEP-AGR-2011-06-18 (Agricultural Economics)
- NEP-ALL-2011-06-18 (All new papers)
- NEP-CTA-2011-06-18 (Contract Theory & Applications)
- NEP-DEV-2011-06-18 (Development)
- NEP-SEA-2011-06-18 (South East Asia)
- NEP-URE-2011-06-18 (Urban & Real Estate Economics)
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