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Untitled: A Study of Formal and Informal Property Rights in Urban Ecuador

  • Jean O. Lanjouw
  • Philip I. Levy

In this paper we explore the substitutability of formal and informal property rights. We analyze new survey data from Ecuador, where households have both formal and informal claims to urban residential property. The latter come from a variety of sources, including the activity of a local boss, or organizer. We first develop a theory of the ability to sell or rent land in which a distinction is drawn between transferable property rights (e.g., title) and non-transferable claims (e.g., length of residence). We use this theory of transactions to show that the increase in price that follows the granting of title may be an overestimate of the households' utility gain. In our empirical work we find that the unconditional effect of granting title is to raise properties' value by 23.5%. However, we also find that informal property rights can substitute effectively for formal property rights, so the marginal effect of titling on the ability to transact and on prices can vary widely among communities and among households within a community. For example, the value of property owned by a newly established household with no adult males can increase by 46% with the acquisition of title. These findings suggest that titling programs should be targeted at young disorganized communities if they are to have much effect.

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File URL: http://www.econ.yale.edu/growth_pdf/cdp788.pdf
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Paper provided by Economic Growth Center, Yale University in its series Working Papers with number 788.

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Length: 69 pages
Date of creation: Apr 1998
Date of revision:
Handle: RePEc:egc:wpaper:788
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  1. Johnson, Omotunde E G, 1972. "Economic Analysis, The Legal Framework and Land Tenure Systems," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 259-76, April.
  2. Besley, Timothy, 1995. "Property Rights and Investment Incentives: Theory and Evidence from Ghana," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 903-37, October.
  3. Jimenez, Emmanuel, 1984. "Tenure Security and Urban Squatting," The Review of Economics and Statistics, MIT Press, vol. 66(4), pages 556-67, November.
  4. Migot-Adholla, Shem, et al, 1991. "Indigenous Land Rights Systems in Sub-Saharan Africa: A Constraint on Productivity?," World Bank Economic Review, World Bank Group, vol. 5(1), pages 155-75, January.
  5. Jimenez, Emmanuel, 1985. "Urban squatting and community organization in developing countries," Journal of Public Economics, Elsevier, vol. 27(1), pages 69-92, June.
  6. Rivers, Douglas & Vuong, Quang H., 1988. "Limited information estimators and exogeneity tests for simultaneous probit models," Journal of Econometrics, Elsevier, vol. 39(3), pages 347-366, November.
  7. Alston, Lee J & Libecap, Gary D & Schneider, Robert, 1996. "The Determinants and Impact of Property Rights: Land Titles on the Brazilian Frontier," Journal of Law, Economics and Organization, Oxford University Press, vol. 12(1), pages 25-61, April.
  8. Friedman, Joseph & Jimenez, Emmanuel & Mayo, Stephen K., 1988. "The demand for tenure security in developing countries," Journal of Development Economics, Elsevier, vol. 29(2), pages 185-198, September.
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