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Credit access and transferable land rights

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  • Eric Van Tassel

Abstract

This paper develops a model in which small landholders earn a return from their land but can increase their income by borrowing funds to invest in a risky project. The model allows us to study the impact of different legal policies governing the use of land as collateral in debt contracts. In this framework, we find that legislation sanctioning the use of land as collateral can sometimes have unintended consequences. In particular, when farmers and banks have asymmetric valuations over land plots, introducing collateral based loans can lead to a reduction in the number of low-risk farmers that choose to borrow funds. This finding offers one explanation for why farmers in countries like Bolivia and Mexico have resisted policies that promise to facilitate the use of land as collateral. Copyright 2004, Oxford University Press.

Suggested Citation

  • Eric Van Tassel, 2004. "Credit access and transferable land rights," Oxford Economic Papers, Oxford University Press, vol. 56(1), pages 151-166, January.
  • Handle: RePEc:oup:oxecpp:v:56:y:2004:i:1:p:151-166
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    Cited by:

    1. Katleen Van den Broeck & Carol Newman & Finn Tarp, 2007. "Land Titles and Rice Production in Vietnam," Discussion Papers 07-32, University of Copenhagen. Department of Economics.
    2. O’Gorman Melanie, 2015. "Africa’s missed agricultural revolution: a quantitative study of the policy options," The B.E. Journal of Macroeconomics, De Gruyter, vol. 15(2), pages 561-602, July.
    3. Ricardo Fort, 2007. "Land inequality and economic growth: a dynamic panel data approach," Agricultural Economics, International Association of Agricultural Economists, vol. 37(2-3), pages 159-165, September.
    4. Carol Newman & Finn Tarp & Katleen van den Broeck, 2015. "Property Rights and Productivity: The Case of Joint Land Titling in Vietnam," Land Economics, University of Wisconsin Press, vol. 91(1), pages 91-105.
    5. Jeremy G. Weber & Nigel Key, 2015. "Leveraging Wealth from Farmland Appreciation: Borrowing, Land Ownership, and Farm Expansion," Land Economics, University of Wisconsin Press, vol. 91(2), pages 344-361.

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