Land Titling and Investment in Tanzania: An Empirical Investigation

Abstract

The role of property rights in resource allocation has been one of the central themes in development economics. There exists extensive theoretical arguments that property rights in land are closely associated with the productive efficiency of agricultural resources as well as investment decisions. However, empirical findings have not been conclusive. This has been complicated due to possible endogeneity of titles, unobserved hetrogeneities and the non-experimental nature of the data. To overcome these problems, the study employs an instrumental variable and fixed effect models. The inheritance status of a plot is used as an IV for the titling status of a plot. Using the 2010/2011 Tanzania National Survey data, it is shown that the effects of titling on investment is positive and sizable. Formal tests of endogeneity are presented to establish the claim that titles are endogenous.