Insecure Property Research Articles

Land Security and Mobility Frictions

Abstract Frictions that impede the mobility of workers across occupations and space are a prominent feature of developing countries. We disentangle the role of insecure property rights from other labor-mobility frictions for the reallocation of labor from agriculture to nonagriculture and from rural to urban areas. We combine rich household and individual-level panel data from China and an equilibrium quantitative framework featuring sorting of workers across locations and occupations. We explicitly model the farming household and the endogenous decisions of who operates the family farm and who potentially migrates, capturing an additional channel of selection in the household. We find that land insecurity has substantial negative effects on agricultural productivity and structural change, raising the share of rural households operating farms by over 40 percentage points and depressing agricultural productivity by more than 20%. Comparatively, these quantitative effects are as large as those from all residual labor-mobility frictions. We measure a sharp reduction in overall labor-mobility barriers over 2004–2018 in the Chinese economy, all accounted for by improved land security, consistent with reforms covering rural land in China during the period. JEL Codes: O11, O14, O4, E02, Q1.

Why Do Farmers Support Stable Land Ownership? Marketization with Chinese Characteristics

Recent debates regarding marketization have focused on the relationship between the state and the market, while the grassroots and their everyday experiences have arguably been understudied. In this paper, we study marketization with the example of land marketization in China. Out of concern for the grassroots’ perspective, we investigate Chinese farmers’ perceptions with regard to stable land ownership of farmland, which are essential for land marketization in the backdrop of intensive land use conversion in China’s urban periphery. Approximately 1200 farmer households were interviewed around 12 cities in mainland China. An ordered probit regression analysis of the survey results reveals a series of factors that explain the individual farmers’ preference for stable land ownership. Among others, the decreasing size of farmer household and rural women’s insecure property rights in farmland are identified as two grassroots-based characteristics underpinning China’s ongoing transition to a more market-based farmland use institution. An important theoretical implication of our research is that the mainstream literature perhaps over-attributes China’s marketization to the state and the market, while under-evaluating the spontaneous support from bottom-up.

Insecure Property Rights and Conflicts: How to Solve Them?

According to the leading literature, the valid enforcement of property rights is a key ingredient for economic development. However, their enforcement can be problematic in international relations, which can be a valid approximation of an anarchic or state of nature environment. In such a context, we do not have a third party that may sanction any illegal behaviour, since the existing international organizations may lack the necessary power to force countries to behave in a specific way. A large variety of papers have attempted to provide a self-enforcing solution to a conflict among players by defining a bargaining range, which may prevent the emergence of a war. Hence, players renounce the fight and leave peacefully, enforcing de facto property rights. In contrast, we propose a model in which contestants decide to solve their dispute by forming a union. The latter can be interpreted in a broad sense, also encompassing the possibility that they form a new political entity. We highlight the welfare implications of that solution and define the non-empty set of parameters, which support such a decision in the long run. Intuitively, from a dual perspective, the model also discloses the circumstances that may lead players to deviate from the union path and split. Therefore, our paper contributes to the literature about the formation and breakdown of countries, although our primary concern is to present a model with an innovative solution to conflicts. Moreover, our work stresses the importance of the enforcement of property rights to guarantee the peaceful development of relations among countries.

Informal land leasing in rural India persists because it is credible

While insecure property rights are considered ‘perverse’ with respect to development, we examine what are the features most amenable for their persistence. Applying a Credibility Thesis framework in the context of rural land tenancy relations in India, that are largely held through private arrangements, we try to understand if there are inherent preferences to the existing informal structure of land leasing. An in-depth primary household survey across four states of India reveals that farmers rely on customary, informal mode of leasing arrangements because of their functionality in terms of no paperwork, easy accessibility, swifter modes of payment and prompt conflict resolution. Informality makes the existing institutional arrangement ‘credible’ in the eyes of both the tenants and owners. This raises the questions of whether policy prescriptions on intricate land related issues should entail appreciation of prevailing informal tenant customs, regulating them, or simply letting them be and realign agrarian support and delivery systems around this embedded informality.

Insecure property rights and the housing market: Explaining India’s housing vacancy paradox

One housing paradox in many markets is the simultaneous presence of high costs and high vacancy rates. India has expensive housing relative to incomes and an urban housing vacancy rate of 12.4%. We show how insecure property rights in India, as a result of rent control and weak contract enforcement, increases vacancy rates. Using a two-way linear fixed effects panel regression, we exploit changes in rent control laws in the states of West Bengal, Karnataka, Gujarat, and Maharashtra to find that pro-tenant laws are positively related to vacancy rates. A pro-landlord policy change liberalizing rent adjustments could potentially reduce vacancy rates by 2.8 to 3.1 percentage points. Contract enforcement measured by density of judges is negatively related to vacancy. We estimate that a policy change in rent control laws would have a net welfare benefit and could reduce India’s housing shortage by 7.5%.

The Key Determinants of Industrialization in Uzbekistan

This work investigates key determinants of industrialization in Uzbekistan since 1991, considering primary political, institutional, and economic conditions in various circumstances. This study aims to find out the factors subject to advancement and hindrance. My work defines the bridge between influencing factors and the development of industrialization in Uzbekistan. Uzbekistan witnessed dramatic changes since the election of a new leader – Sh. Mirziyoyev, as the second President of the Republic of Uzbekistan (late 2016), and the reforms carried out in changing economic policy and strategy orientation and foreign economic activities, became one of the most dynamic in the post-Soviet era of the country. The key findings of this work are as follows: (i) policy change and strategy orientation, including the transition from a defensive self-reliance approach-autarky to a gradual liberal approach and comparative advantage following strategies are central to industrialization; (ii) introduction of export-oriented industrial policy is of paramount importance to the industrialization process; (iii) human capital advances the industrialization; (iv) physical capital boosts industrialization; (v) specific trade and investment-oriented policies are intrinsic to effective long-term industrial policy; (vi) elimination of the most noticeable obstacles to industrialization as insecure property rights, inefficient logistic chains, and monopolistic production is essential on the way to the industrialization.

Property Rights and Urban Form

How do the different elements in the standard bundle of property rights, including those of possession and transfer, influence the shape of cities? This paper incorporates insecure property rights into a standard model of urban land prices and density, and makes predictions about investment in land and property, informality, and the efficiency of land use. Our empirical analysis links data on institutions for land titling and transfer with multiple urban outcomes, in 190 countries. The evidence is generally consistent with the model’s predictions, and more broadly with the Demsetz’s (1967) approach to property rights institutions. Indeed, we document world-wide improvements in the quality of institutions facilitating property transfer over time.

Investment with insecure property rights: Capital outflow openness under dictatorship

Investment with insecure property rights: Capital outflow openness under dictatorship

Public security, technology adoption and welfare implications in an insecure property rights environment

Public security, technology adoption and welfare implications in an insecure property rights environment

Land Conversion for Tourism Development under Vietnam’s Ambiguous Property Rights over Land

The paper aims to explore the process of land conversion for tourism development in Vietnam, under the present ambiguous and insecure property rights system. Four case studies in different geographical areas were selected to analyse land conversion and land compensation for tourism projects before and after the implementation of the new land law in 2013. The findings of this study show that, in the present legal system of land and property rights, the rights of local people are not sufficiently guaranteed due to the decisive role of the State not only in defining compensation prices for land in the case of compulsory land acquisition but also in determining whether tourism projects are in the public’s interest or not (thus deciding the appropriate land conversion approach as well as affecting price negotiations). The research also found that, although a voluntary land conversion approach (when the project is not in the public’s interest), based on the 2013 Land Law, offers land users a better negotiation position and a higher compensation payment, possibly reducing land-related conflicts between the State and land users, ambiguity over property rights in fact increased due to the government’s substantial discretion to choose between ‘public purpose’ and ‘economic purpose.’ The paper concludes with questioning whether the present legal basis for compulsory land acquisition is future proof since urbanisation pressure is likely to increase, which may lead to even more land conflicts in the near future.

Bread or justice - Land restitution and investments in Montes de Maria, Colombia

In 2011, Colombia started a legal land restitution process whereby government institutions help internally displaced people (IDPs) reclaim land dispossessed after 1991 through the violent conflict involving the communist guerilla, paramilitaries and the army. The designated land courts normally covers voluntary sales at the going market price at the time of dispossession, presuming buyers took advantage of the IDPs’ need for money and their low expectations of returning from their current sites of refuge. We study the rise and fall of a commercial cassava operation that started to buy land from IDPs openly in the Montes de María region on Colombia’s Caribbean coast after peace returned in 2007. After losing several land restitution court cases, the company shifted from dairy cattle that required high investments to the less demanding, but also less productive, buffalo to minimize losses in case of future successful restitution claims. The land restitution law will probably be extended beyond the initial 2021 limit due to slow progress, thereby perpetuating the insecure property rights situation that hinders investments in agriculture.

The political economy of insecure property rights: insights from the Kingdom of Sicily

AbstractHow did the evolution of the rule of law become stunted in Sicily during the 19thcentury? The work of economist Yoram Barzel, particularly his property-rights approach to understanding the political economy of state formation, is uniquely suited to understanding the failure of Italy's unification process to secure the rule of law in Sicily during the 19th century. This failure can be explained by a lack of a credible commitment to the rule of law in the state formation process. I argue that this lack of credible commitment manifested itself in the abolition of previously existing parliamentary institutions as an independent collective action mechanism, as well as prior constitutional agreements that existed in the Kingdom of Sicily. The resulting uncertainty over the security and legal definition of property rights over land raised the transaction costs of competing for resources through productive specialization and market exchange. In turn, it reduced the relative costs of competition for land ownership and the use of enforcement through other means, such as rent seeking or organized crime.

Property Rights, Land Disputes and Water Scarcity: Empirical Evidence from Ethiopia

This article investigates the relationship between insecure property rights and land disputes using farm household panel data from the highlands of Ethiopia. Our identification strategy relies on the gradual rollout of a land certification program. We find that tenure security significantly reduces the likelihood for a farm household to experience land disputes. We further document that water scarcity during the rainy seasons is an important determinant of land disputes. However, farm households that have been certified are significantly less likely to experience land disputes triggered by water scarcity than farm households without land certification.

The end of ‘toleration’? Policy ambiguity and converted-housing occupancy in China

An uncommon ‘homeowner’ protest in Shanghai in 2017 manifested public anger towards a government crackdown on commercial property converted apartments (CPCAs). Spotlighting this previously hidden but significant Chinese housing submarket, the episode highlighted ‘homeowner’ concerns over insecure property rights. Internationally, commercial-to-residential conversion is nothing new. Indeed, it has been championed as a contributor to addressing housing shortage. How has an internationally well-established practice generated such tensions in China? Focusing on the Shanghai case, this paper analyzes the processes involved in commercial-to-residential apartment conversion by examining interactions between state, market players and ‘homebuyers’, drawing on discourse and policy analysis. Reflecting consideration for short-term gains and conflict avoidance, state regulations were historically vague and open to interpretation. Non-government stakeholder behaviour was underpinned by hopes that legitimacy of residential use would be subsequently confirmed. The 2017 ‘policy clarification’ has placed CPCA owners at risk of major financial losses and possibly even homelessness. Historic policy ambiguity and erratic enforcement stored-up trouble for the future.

Growth and Insecure Private Property of Capital

This paper revisits Strulik’s model of growth with insecure property rights. In this model, different social groups devote some effort to control a share of the capital stock. We show that a slight variation in the modeling of strategic interactions results in the coexistence of savings and efforts to control a share of the capital stock. We also study the effects of a change in the number of social groups on growth. We also show that an increase in social fractionalization may lead to less effort devoted to control capital and to a higher growth rate.

Informality trap: a foundation of Russia’s statist-patrimonial capitalism

ABSTRACTThe paper analyses the origins of Russia's statist-patrimonial political economy, marked by insecure property rights and particularistic state-business relations. Based on in-depth interviews, the paper argues that statist-patrimonial capitalism is not only a result of top-down activity of the state sovereign and its corrupt agents but is also a system that rests on the bottom-up contribution of the bulk of economic actors - small and medium-sized firms. This contribution happened - often inadvertently - through informal practices that locked small firms in the ‘informality trap' and undermined the security of property. Back in the 1990s some of those informal practices were taken up by companies out of expediency. In the 2000s informality backfired as the state exploited it to violate property rights of virtually any business actor. Thus the advent of statist-patrimonial capitalism was facilitated, among other factors, by the informal choices and practices of business actors in the previous decade.

Insecure Property Rights and the Missing Middle

We analyze a theoretical model in which entrepreneurs’ property rights are threatened by “raiders” who can challenge them to a contest for control of their firms. Entrepreneurs have heterogeneous productivity, and decide how much capital to invest before raiders decide whom to attack. In equilibrium, low productivity entrepreneurs are unaffected by the existence of raiders, while mid- and high-productivity entrepreneurs suffer. However, while raiders essentially act like a tax for the highest productivity entrepreneurs, the investment behavior of mid-productivity entrepreneurs who try to avoid an attack is more drastically affected. Our model provides a novel theoretical explanation for the “missing middle” observed in many countries with insecure property rights.

Land reform and conflict before the Civil War: landowner response to tenancy reform in 1930s Catalonia

AbstractThis article studies the impact of insecure property rights on the behaviour of owners of land before the Spanish Civil War. The theoretical literature on land reform argues that legal threats to the status quo determine agrarian organization, with owners selling land and moving to other asset classes or engaging in large‐scale substitution of sharecroppers and tenants with wage labourers. This study, which uses municipal data on tenant evictions in Catalonia in 1934–5, does not find that uncertainty over property rights in the 1930s meant that owners tried to substitute tenants with wage labourers, especially in the case of the controversial rabassa morta contracts on vineyards. Here it is argued that after 40 years of organizational adjustment to shocks related to phylloxera infestations, legal changes, urbanization, and changes in relative prices, by the 1930s the margin for adjustment was small.

Ownership matters: Natural resources property rights and social conflict in Sub-Saharan Africa

Empirical tests of the “resource curse” thesis have provided inconclusive evidence for the claim that natural resource abundance increases the risk of social conflict. The present article argues, based on a novel political economy framework and a new data set, that it is important to analyze how states regulate the access to their natural resources to understand the interrelationship between resources and public resistance against resource extraction arrangements. We claim that international rather than state resource ownership fosters the regional protest potential and overshadows the efficiency gains that foreign investment might create. Especially the siphoning of resource rents to international owners instigates resentment among the local population. Distinguishing between private, public, domestic and international ownership arrangements, we assess the effects of natural resources control rights regimes on state repression using new GIS-based data on diamond and gold mines as well as oil and gas fields in Sub-Sahara Africa. Our multilevel analysis shows that repression as an answer to societal dissent is particularly likely in grids hosting international oil companies. Furthermore, we find that international oil firms further state repression especially under insecure property rights.

Natural Resource Conflict Analysis among Pastoralists in Southern Ethiopia

This paper examines resource-related conflict among pastoralists in southern Ethiopia, specifically the Somali and Oromo ethnic groups. It applies theories of property rights, environmental security and political ecology to discuss the complexity of the conflict, using narrative analysis and conflict mapping. Results reveal that the conflict results from interrelated cultural, ecological and political factors. The systems of governance, including the setting up of regions on an ethnic basis and associated competition for land and control of water-points, have contributed to violent conflict between the two ethnic groups. The creation of new administrative units (kebeles) close to regional boundaries has exacerbated the conflict. Moreover, change in land use, prompted by insecure property rights to communal land, rather than expected increase in economic benefits has caused conflicts among the clans of the Oromo. The findings suggest Ethiopian authorities support the functioning of traditional access options, successful operation of customary courts and penalising opportunistic actors to address inter-ethnic conflicts. Applying land use and administration guidelines and empowering customary authorities would reduce the incidence of inter-clan conflict.