Economic rationality and informal urban land transactions in Accra, Ghana

Abstract

It has been argued for some time that the apparently haphazard development of neighbourhoods in Sub-Saharan African (SSA) cities is largely related to the plethora of informal land transactions, which typify many house and land buying purchasing decisions. The authors of this paper question this assertion and develop an alternative view of such purchasing decisions based upon the economics of property rights and the theory of bureaucracy. Using original data from Accra a number of models are developed to examine the implicit argument that urban transactions are typified by nonrational economic behaviour. It is concluded that the evidence points in exactly the opposite direction - that most (if not all) such transactions can be characterized in terms of fully rational economic behaviour and that the latter efficiently and effectively circumvents the bureaucracy, which exists to administer such transactions. It is also concluded that major reforms of the Land Administration system are required in order to enable market forces to more effectively operate whilst the regulatory regime itself needs to be adjusted in order to eliminate market failures which it itself has managed to create.