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Property rights on unused assets and investment incentives: evidence from Brazil

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  • Pietro Vertova

    (University of Bergamo)

Abstract

It is usually stated that property rights security on assets positively affects investment incentives since it guarantees the ability to get the future benefits from investments. Yet, the empirical evidence on this relationship is ambiguous. From a theoretical point of view, this is not surprising since property rights security on asset may even entail a negative effect on investment incentives as long as property rights are endogenous to investments (Besley, Journal of Political Economy 103:903–937, 1995) or investors are characterized by time-inconsistent preferences (Vertova, Review of Socio-Economic Perspectives 5:61–75, 2020). Instead, from a theoretical point of view, a clear-cut negative relationship exists between property rigths security on unused assets (the expected ability to invest on a unsued asset) and investment incentives. In this paper I test this theoretical prediction using a difference-in-difference matching method on Brazilian municipal data. I find that land occupations by Landless Workers’Movement (as a proxy for property rights insecurity on unused assets) positively affect the degree of land use (as a proxy for investment) in Brazilian municipalities.

Suggested Citation

  • Pietro Vertova, 2025. "Property rights on unused assets and investment incentives: evidence from Brazil," European Journal of Law and Economics, Springer, vol. 59(3), pages 419-437, June.
    • Handle: RePEc:kap:ejlwec:v:59:y:2025:i:3:d:10.1007_s10657-025-09845-z
    DOI: 10.1007/s10657-025-09845-z
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    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment

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