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Insecurity of Property Rights and Matching in the Tenancy Market

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  • Macours, Karen
  • de Janvry, Alain
  • Sadoulet, Elisabeth

Abstract

This paper analyzes the effects of insecure property rights over land on the functioning of the land rental market in the Dominican Republic. It shows that insecurity of property rights not only reduces sharply the level of activity on the land rental market, but also causes market segmentation. A principal-agent framework is used to model the landlord’s utility maximization, where he takes into account the risk of losing the land when it is not traded within a narrow local circle of confidence. Using data collected with a methodology that enables to characterize the entire market, we show that insecure property rights lead to matching in the tenancy market along socio-economic lines and hence severely limit access to land for the rural poor. Simulations suggest that improving tenure security would increase the total area rented to the poor by 63%. While a small fraction of this gain is achieved via formal titling, most is obtained through reducing conflicts over land and enhancing protection of property rights. Results also show the importance of minimum working capital endowments for the poor in gaining access to land in the rental market.

Suggested Citation

  • Macours, Karen & de Janvry, Alain & Sadoulet, Elisabeth, 2004. "Insecurity of Property Rights and Matching in the Tenancy Market," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt8r7938m3, Department of Agricultural & Resource Economics, UC Berkeley.
  • Handle: RePEc:cdl:agrebk:qt8r7938m3
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    Cited by:

    1. Gine, Xavier, 2005. "Cultivate or rent out ? Land security in rural Thailand," Policy Research Working Paper Series 3734, The World Bank.
    2. Gottlieb, Charles & Grobovsek, Jan, 2015. "Communal land and agricultural productivity," LSE Research Online Documents on Economics 86311, London School of Economics and Political Science, LSE Library.
    3. Sebastian Galiani & Ernesto Schargrodsky, 2011. "Land Property Rights and Resource Allocation," Journal of Law and Economics, University of Chicago Press, vol. 54(S4), pages 329-345.
    4. Jin, Songqing & Deininger, Klaus, 2009. "Land rental markets in the process of rural structural transformation: Productivity and equity impacts from China," Journal of Comparative Economics, Elsevier, vol. 37(4), pages 629-646, December.
    5. Lee J. Alston & Bernardo Mueller, 2010. "Property Rights, Land Conflict and Tenancy in Brazil," NBER Working Papers 15771, National Bureau of Economic Research, Inc.
    6. Ma, Xianlei & Heerink, Nico & van Ierlan, Ekko & Lang, Hairu & Shi, Xiaoping, 2015. "Impact of Tenure Security and Trust on Land Rental Market Development in Rural China," 2015 Conference, August 9-14, 2015, Milan, Italy 212219, International Association of Agricultural Economists.
    7. Castañeda Dower, Paul & Pfutze, Tobias, 2013. "Specificity of control: The case of Mexico's ejido reform," Journal of Economic Behavior & Organization, Elsevier, vol. 91(C), pages 13-33.
    8. Liesbet Vranken & Karen Macours & Nivelin Noev & Johan Swinnen, 2007. "Property Rights Imperfections, Asset Allocation, and Welfare: Co-Ownership in Bulgaria," LICOS Discussion Papers 18007, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    9. Sharmina Ahmed & Christopher Findlay, 2012. "Participation and Contract Choice in the Tenancy Market," EERI Research Paper Series EERI_RP_2012_04, Economics and Econometrics Research Institute (EERI), Brussels.
    10. Bellemare, Marc F., 2010. "Insecure Land Rights and Share Tenancy in Madagascar," MPRA Paper 23640, University Library of Munich, Germany.
    11. de Janvry, Alain & Sadoulet, Elisabeth, 2007. "Toward a Territorial Approach to Rural Development," eJADE: electronic Journal of Agricultural and Development Economics, Food and Agriculture Organization, Agricultural and Development Economics Division, vol. 4(1).
    12. Deininger, Klaus, 2010. "Towards sustainable systems of land administration: Recent evidence and challenges for Africa," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 5(1), September.
    13. Conning, Jonathan H. & Robinson, James A., 2007. "Property rights and the political organization of agriculture," Journal of Development Economics, Elsevier, vol. 82(2), pages 416-447, March.
    14. Janvry, Alain de & Sadoulet, Elisabeth, 2004. "Fitting the Facts and Capitalizing on New Opportunities to Redesign Rural Development Programs in Latin America," Brazilian Journal of Rural Economy and Sociology (RESR), Sociedade Brasileira de Economia e Sociologia Rural, vol. 42(3), September.
    15. Hurrelmann, Annette, 2008. "Analysing agricultural land markets as organisations: An empirical study in Poland," Journal of Economic Behavior & Organization, Elsevier, vol. 67(1), pages 338-349, July.

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