Informal Property Rights Research Articles

How planning intervention changes the “price tags” of property rights? Towards a dynamic understanding of China's small property right housing

While studies of property rights have long gone beyond the legal-illegal dichotomy, how to quantify the varying degree of property rights remains a challenging task. Focusing on a special type of informal housing—Small Property Right Housing (SPRH) in China, this study examines how planning intervention affects the pricing mechanism of SPRH through the theoretical lens of graded property rights. A previous study has unravelled the pricing mechanism of SPRH by quantifying the impact of informal institutions inherent to the SPRH market that give different “price tags” to varying degree of property rights, while not being able to capture the impact of external interventions. Drawing on two SPRH datasets before and after a Master Plan of urban villages conservation announced in 2019, we employ difference in difference (DID) estimations to examine how planning intervention affects SPRH prices by way of altering the strength of informal property rights. We also develop spatial error models (SEM) to account for spatial autocorrelation. This research extends and enriches the robust conceptualisation of graded degree of informal property rights by capturing the changes caused by external intervention to offer a dynamic and more accurate understanding of SPRH pricing mechanism. It also demonstrates that planning can go beyond sanctioning and redlining to tolerate and steer informal development.

When Bulldozers Loom: Informal Property Rights and Marketing Practice Innovation Among Emerging Market Microentrepreneurs

Our paper shows that in contexts where formal ownership of productive assets is limited, informal leasing has a strong positive impact on innovation in marketing practices.

Strategizing actors and agents in the functioning of informal property Rights: The tragicomedy of the extralegal housing market in China

This paper engages with the ongoing theoretical enquiry into the actual functioning and diverse practices of informal property rights. Departing from the prevailing neoliberal perspective and the credibility thesis, this paper develops a framework of institutional analysis to understand the functioning and regional variation of informal property rights. It takes the institutions-as-equilibria perspective and situates both structural and endogenous institutional variables in actors’ strategic choices. We test our conceptual framework through a multisite empirical study of extralegal and untitled housing in China. Building on game theory, archival research, and fieldwork, we compare the key variables contributing to the divergent fortunes of extralegal and untitled housing property rights in three Chinese cities: prospering in Shenzhen, selectively interfered with in Beijing, and eliminated in Sanya. The functioning of informal property rights is found to be contingent upon diverse strategic interactions of local governments and key local stakeholders. Our paper highlights the formation of local actors’ behavioral beliefs and their adjustment through a nonlinear feedback mechanism. It suggests the necessity and significance of integrating structural and endogenous institutional variables, elaborating on the interplay of formal and informal institutions, and applying the microeconomic and dynamic perspectives to better understand the functioning and diverse practices of informal property rights in the developing world.

The Power of the Pen: Informal Property Rights Documents in Zambia

Abstract This article explores the expansion of informal property rights documents through the case of chiefs’ titles in Zambia. Entrepreneurial chiefs have created written land rights for citizens on customary land in the form of letters, signed maps, and certificates. These documents are an alternative to state land titling that allows chiefs to maintain their control over land. However, chiefs’ titles are extra-legal: they are enforced by the same traditional leaders who govern unwritten customary rights, raising doubt about whether written land rights can strengthen citizens’ land claims without changing the existing power structures. Evidence from 121 interviews with chiefs, bureaucrats, and smallholder farmers and a survey of over 5,500 citizens shows that, despite their flaws, chiefs’ titles do increase citizens’ perceptions of tenure security. This suggests that informal property rights documents can be a powerful tool in a citizen’s arsenal. Further, these findings illustrate a process of adaptation and change within customary land institutions.

Strategizing Actors and Agents in the Functioning of Informal Property Rights: The Tragicomedy of the Extralegal Housing Market in China

Strategizing Actors and Agents in the Functioning of Informal Property Rights: The Tragicomedy of the Extralegal Housing Market in China

Evolution of deterrence with costly reputation information.

Deterrence, a defender’s avoidance of a challenger’s attack based on the threat of retaliation, is a basic ingredient of social cooperation in several animal species and is ubiquitous in human societies. Deterrence theory has recognized that deterrence can only be based on credible threats, but retaliating being costly for the defender rules this out in one-shot interactions. If interactions are repeated and observable, reputation building has been suggested as a way to sustain credibility and enable the evolution of deterrence. But this explanation ignores both the source and the costs of obtaining information on reputation. Even for small information costs successful deterrence is never evolutionarily stable. Here we use game-theoretic modelling and agent-based simulations to resolve this puzzle and to clarify under which conditions deterrence can nevertheless evolve and when it is bound to fail. Paradoxically, rich information on defenders’ past actions leads to a breakdown of deterrence, while with only minimal information deterrence can be highly successful. We argue that reputation-based deterrence sheds light on phenomena such as costly punishment and fairness, and might serve as a possible explanation for the evolution of informal property rights.

How effective are informal property rights in cities? Reexamining the relationship between informality and housing quality in Dar es Salaam

ABSTRACT Improving access to adequate housing is a global development priority. Formalisation of property rights occupies a central role in this agenda, based on long-held ideas about the weaknesses of informal arrangements in cities. In practice, however, we know remarkably little about how informal property markets in urban areas work. Drawing on both quantitative and qualitative data, this paper demonstrates that informal institutional arrangements in Dar es Salaam are surprisingly effective in securing ownership and addressing transaction costs – in other words, in the key dimensions of property rights targeted by formalisation projects. It also reveals, however, that the system is ineffective at upholding the third yet often-overlooked component of property rights: land use rights. This results in a social dilemma that traps housing in a low-quality equilibrium. The findings have direct implications for policy in Dar es Salaam and across the world and open new avenues for comparative research.

Unraveling the self-made city: The spatial impact of informal real estate markets in informal settlements

Informal real estate markets have developed as a result of deficiencies of formal real estate markets and play a crucial role in providing housing to the urban poor. This contribution combines an adaptation of Ostrom's rules with property rights theory to study the rules that have developed in the informal real estate, their spatial impact and implications of formal-informal interactions in an informal settlement in Nairobi, Kenya. It is argued that although the nature of formal and informal property rights regimes is highly similar, conflicts arise when the two concur as they are based on different forms of legitimacy: input and output legitimacy. To the formal market, the informal market is illegitimate as it infringes on formal property rights and planning regulations, whereas to the informal market, the formal market is illegitimate due to its excluding nature. The research opts for further research in the discipline of spatial planning in order to gain a better understanding of formal-informal interactions.

Informal Property Rights as Relational and Functional: Unravelling the Relational Contract in China's Informal Housing Market

AbstractIn the face of state‐led land grabs, enterprising Chinese peasants have started a revolution in the ambiguous and insecure rural tenure system by developing an extralegal property system known as the small property right (SPR). Using the SPR, peasants are able to capitalize on their property through the sale of houses built on collectively owned land. Little is known, however, about the specific process behind the development of the SPR by the peasants, or how this extralegal property system functions in terms of securing the use and transfer of property without the backing of law. This article aims to clarify the situation through the lenses of the Endogenous Nature of Institutions and Relational Contract Theory, aiming to understand the socially constructed, endogenous and relational nature of the property rights that make SPR functional. Based on an ethnographic investigation of Beijing's largest SPR housing settlement, we show how enterprising peasants develop long‐term relational contracts with urban households for the provision of housing services, secured on the basis of the common interests and symbiosis of the two parties and a reputation system that serves to deter defaults. The discretionary treatment of SPR housing by local states serves as a further motivation for the village and the informal homeowners to preserve a stable property arrangement, with such a specific institutional setting being an exemplar of China's pragmatic state entrepreneurialism.

Negotiating Informality– Ambiguity, Intermediation, and a Patchwork of Outcomes in Slums of Bengaluru

In developing countries, procedural ambiguity due to bureaucratic overlap and political discretion gives rise to divergence between law and practice. In this context of pervasive informality, it is important to consider how local negotiations produce disparate outcomes. We examine these local negotiations to explain how informal property rights are acquired and how markets operate in the slums of Bengaluru, India. Drawing on original interview and survey data, we describe how at least 18 types of property documents issued to urban slum residents can be ordered along a tenure continuum. Intermediaries are required to negotiate the opportunities that lie hidden within ambiguity. A first set of political intermediaries helps slum residents acquire property rights incrementally along this continuum. A second set of intermediaries helps facilitate informal housing transactions, keeping markets liquid across the tenure continuum. The mechanics of acquiring and transacting informal properties can differ across cities and countries, but, across contexts, intermediation helps negotiate informality.

What Drives Take-up in Land Regularization: Ecuador’s Rural Land Regularization and Administration Program, Sigtierras

During the past decades, land regularization and administration programs have become part of the development tool box to improve the welfare of rural farmers. However, these programs cannot produce the intended economic benefits if people choose not to enroll in them. In this context, this paper investigates how household, plot, and community characteristics, as sources of informal property rights, explain the low take-up (less than 15%) of land regularization under the National Rural Land Information and Management System Program (Sigtierras Program) in Ecuador. Using newly collected survey data combined with census tract-level data and administrative project data, we assess how different household-, plot-, and community-level characteristics affect the likelihood of take-up of legal support to regularize tenancy offered by Sigtierras. Our results suggest that some household-specific and community-level characteristics that enhance a household’s ownership claim are important determinants of take-up. Our empirical results provide insights to inform targeting strategies to enhance the effectiveness and efficiency of future land regularization efforts in Ecuador.

Men in Grey Suits: Shark Activity and Congestion of the Surfing Commons

This study extends recent research on informal property rights at surf breaks by exploring the process through which nature, by establishing conditions conducive (or not) to the presence of sharks, shapes the baseline level of exploitation by surfers of the common-pool resource represented by surf breaks. Since 1980, there have been nine fatal shark attacks off the coast of California, and in all nine cases the great white shark was the offending species. Given this inherent danger, the presence of large sharks mitigates, at least to some degree, the tendency toward the ‘tragedy of the commons’ in the case of surf breaks. Using data on surf break congestion, surf break quality, shark activity, and other key variables from 144 surf breaks in California, empirical results from OLS and ordered probit models presented in this study indicate that surf breaks in California that are associated with the highest levels of shark activity tend to be less congested, perhaps by as much as 28%, than their counterparts that are visited less often by sharks.

Informal institutions and firm valuation

Research on the effects of the institutional environment on firm market valuation have concentrated on formal institutions and in particular legal frameworks. However, changes in formal institutions may have little to no effect on the deeply ingrained socio-economic processes which determine the way of conducting business in a country. In such a situation, informal institutions may play a much more important role for firms. Using property rights as an example, this paper models the impact of formal and informal institutional changes on the market growth potential of Polish firms. Our examination indicates that Poland's formal and informal institutions diverge significantly, with changes in informal institutions shaping market worth much more than binding formal frameworks. We conclude that firm valuation in an unstable institutional environment is due mostly to developments in informal property rights and other factors external to the firm, with comparatively little effect of firm-specific attributes.

Small family business in Russia: formal or informal?

PurposeThe purpose of this paper is to deal with informal entrepreneurial activity of micro and small family businesses in the specific transitional environment.Design/methodology/approachThe paper uses two cases – an informal micro business (“marginal” family business), and a formal retail small firm (“simpleton” family firm), respectively, of a panel conducted in 2013–2015 in Moscow.FindingsFirst, the real distribution of responsibilities between family members is informal; it relies more on interpersonal trust and “common law.” Second, exactly the ease of governing such trust-based businesses for the founders’ generation sets limits of succession of small-scale family businesses. Third, as trust in the state is very low, the policy of Russian authorities to quickly force informal entrepreneurs to become legalized is substantially wrong; the results would be either a transformation of “simpleton” into “marginal” businesses or quitting business.Research limitations/implicationsResearch limitations of the study are the number of observations and the localization of the panel only in the capital of Russia.Practical implicationsThe fundamental failure of Russian State policy toward small-scale family businesses is its attempt to convince “marginal” to formalize and to oppress “simpleton” family businesses pushing them into informality. In fact, it should be designed vice versa: tolerate “marginal” businesses and let them to “live and die” while shaping a friendly environment for “simpleton” family firms.Originality/valueThe paper argues that the most important facet of informality in small family entrepreneurship is the informal property rights and governance duties’ distribution among the family members.

Land values, property rights, and home ownership: Implications for property taxation in Peru

This paper evaluates the effect of property rights on property values in Peru. Previous research on squatting has shed light on how the provision of formal land titles affects a number of socioeconomic outcomes and a subset of this research has provided estimates on how the provision of formal titles affects property values. However, the phenomenon of squatting encompasses a variety of informal property rights distinct from the possession of a legal title. Using an exceptionally rich household data set including geo-location at the community level we study the effects of both formal and informal property rights on property values. Having a title increases property values by almost 7 percent and squatting on the land by invasion reduces values by about 6 percent. Using these estimates, we determine the potential losses of property tax revenue and are able to study the issue of squatting in the context of public finance.

Property Law for Development Policy and Institutional Theory: Problems of Structure, Choice, and Change

This paper brings the institutional and ontological assumptions of development-by-incorporation theorists such Hernando De Soto into dialogue with modern property scholarship. The central argument of the incorporationists is that state-based legal systems should simply recognize and incorporate the informal property rights of urban squatters and rural villagers, thereby creating the necessary institutional conditions for successful economic development in those communities. While not directly addressing the consequentialist side of the argument, this paper argues that our knowledge of modern property systems poses several significant challenges to this prescription. The most significant of these are that modern property systems have often resisted incorporating informal property rights, and indeed often suppressed them, that they typically involve a great deal more indeterminacy than institutional theorists assume, that the very boundaries of modern property systems seem to be shifting beyond the nation state system, that incorporation decisions will necessarily involve significant normative choices, and that some traditional systems may simply be inconsistent with the institutional ontology of modern economic institutions.

Guarding giants: resource commons quality and informal property rights in big-wave surfing

This study extends prior empirical research on issues associated with the common-pool resource represented by surf breaks (i.e., surfing locations) by (1) creating an alternative, perhaps more objective metric, based on a logistic transformation of pairwise comparisons of the results of big-wave surfing competitions, of surf break quality, (2) applying the alternative surf break quality metric to “big-wave” surf breaks and (3) varying the test area by examining big-wave surf breaks worldwide. The results presented here are perhaps even more compelling than those from prior research—indicating that a marginal increase in surf break quality leads to a relatively large increase—in this case more than 30% points—in the probability of observing fierce localism at surf breaks. The finding here of a larger marginal effect of surf break quality on localism in big-wave surfing than in traditional surfing supports the idea that big-wave surfing and traditional surfing represent distinct markets, characterized by different technologies and inherent dangers, such that localism at big-wave surf breaks exceeds that at traditional surf breaks in terms of ferocity, ceteris paribus. Although this study focuses specifically on the relationship between surf break quality and localism, our research highlights the importance of informal property rights protection of common-pool resources.

Bribery with Chinese Characteristics? Corruption, Fuzzy Property Rights, and Rapid Growth

This paper addresses the question of whether the way bribery is practiced in China is such that corruption might be compatible with rapid economic growth during the boom years between 2000 and 2007. In particular, it examines whether bribery based on diffuse reciprocity transforms a corrupt relationship from one based on short-term egoistic gains (looting) to one based on long-term gains (profit maximizing), with the assumption that such a form of bribery will lead the parties to maximize total gains and hence will encourage long-term growth rather than short-term predatory looting. More broadly, the paper inquires whether a regime of informal property rights based on bribery and diffuse reciprocity might compensate for the shortcomings of an imperfectly constructed and incomplete set of formal property rights such as has emerged in post-Mao China and thereby improve the prospects for economic growth. The paper concludes that while bribery based on diffuse reciprocity may encourage the parties directly involved in such corrupt exchanges to maximize their total long-term gains, so long as bribery remains a private good and an informal property rights regime based on bribery remains subject to abrupt and catastrophic revision due to its illegal nature, “bribery with Chinese characteristics” cannot be characterized as growth enhancing and thus cannot be a major explanation for why the Chinese economy grew rapidly during the “third boom.”

Impacts of Large Scale Foreign Land Acquisitions on Rural Households: Evidence from Ethiopia

The impact of large-scale foreign land acquisitions (“landgrabs”) on rural households in developing countries has proven a highly contentious question in public discourse. Similarly, in the academic literature, evolutionary theories of property rights and enclosure models make diametrically opposed predictions about the impacts on holders of informal property rights of increased demand for land. The current paper uses a multi-method approach to provide much-needed empirical evidence on the impacts of large-scale land acquisitions in Ethiopia. We use basic economic theory to structure evidence from disparate sources, including: a survey of existing qualitative evidence; original legal analysis of specific foreign land-acquisition contracts; and original econometric analysis of new World Bank household survey data. The evidence from all three methods suggests large-scale foreign land acquisitions are associated with losses of land and resource rights for rural households. While there is some compensating evidence of increased household expenditure, it is difficult to say whether this increase is caused by growth in incomes or in implicit prices.

Geomatics and the Law \ The Effect of Informal Property Rights on First Nations’ Community Well-Being

Geomatics and the Law \ <i>The Effect of Informal Property Rights on First Nations’ Community Well-Being</i>