Property Rights in Land,

Property Rights in La= nd,

Jean-Phillipe Plattea= u,

In Institutions, S= ocial Norms and Economic Development

Questions:=

Evolving from a common property system:

= 1)&n= bsp; Do private rights over land need to be consolida= ted and deepened?

= 2)&n= bsp; Does the evolution take place in an endogenous m= atter?

One view: the traditional property rights sy= stem is a misfit for what is needed for intensive agriculture and rapid growth.<= o:p>

Transformation of lan= d rights is needed – replace traditional system with modern system.=

A different view: traditional system is too static a= view – traditional systems evolve. Evolutionary Theory of Land Rights (ETLR). Indigenous rights under the impuls= e of market forces will evolve in an efficiency enhancing direction. Formal government structures can f= ormalize and consolidate these emerging rights.

Basic contention of E= TLR:

Population grows / ma= rket opportunities emerge, land scarcity increases, people will demand more tenu= re security.

Land tenure security = will increase in two domains: the = range of the rights held, and the autonomy of the landowner in exercising these rights.

Range issues: what crop to grow, what to do with= the output, right to prevent others from using, right to plant in successive seasons (to not fallow), to plant trees, to undertake other improvements (bunds, terraces, irrigation,…), right to lend, right to transfer, ri= ght to sell.

Hierarchy: lend, give, bequeath, rent, mortga= ge, sell.

Autonomy: is right of the individual acting alone? After consulting famil= y, elders, lineage, … Do these social structu= res preserve the right of repossession, repurchase,… = Conditional or unconditional decision making power.

ETLR argues that the pressures lead to increasing range of issues covered by tenure and increasi= ng autonomy of the decision maker. The final state, ‘…this endogenous evolution must be aided by a pub= ic intervention designed to consolidate and legally sanction the rights that h= ave emerged on the field…’ (p. 123).

World Bank study in <= st1:country-region w:st=3D"on">Ghana, Ken= ya, = Rwanda: the proportion of operated parcels acquired through purchase varies from less than 1% to nearly 30%. Those who think they can sell with= out external approval: 6% to 50%.=

Proportions are highe= r when population pressure is stronger and commercialization is more advanced.

The role of the public sector:

Scarcity increases, d= isputes increase, conflicts become apparent, litigation costs rise, land prices rise making people more willing to pay the costs of disputes,…Threat to the social order leads the government to get the signal that they need to act.<= o:p>

Inefficiency – = people arguing about land in court rather than weeding a crop on the land to sell. Putting shacks on the l= and, not investing until the dispute is resolved, putting up a rickety fence, planting trees that die….

He gives the case of = Thailand in the late 1800s, early 1900s. This= more or less describes the process.

‘…the tas= k of the government appears essentially non-problematic. It only consists of supporting a c= hange that is desired by everyone (including officials who own land themselves).’ (p. 127).=

Demand models: a demand for a political / institu= tional innovation.

Two types of benefits= :

= Allocative effects from more efficient use of land

D= ynamic effects, from land conservation and improvement.

= Allocative efficiency:&nb= sp;

Cropping choices beco= me more long term, so potential efficiency gains.

Land transferred from= less productive to more productive farmers / consolidated into larger parcels fr= om small scattered parcels.

Switch from subsisten= ce cultivation to commercial agriculture.

Dynamic effects: soil conservation (or lack of degradation), investment in improvements.&= nbsp; You will get the gains of your investment. Further, the investments you do ma= ke will be reflected in the market, so you can get them back if you do sell.

Not only more willing= to invest, but more able, since land is collateral, can use to get access to credit.

Another benefit ̵= 1; it provides the government with a tool for assessing property taxes and genera= ting revenue. It is of= ficial and it records value – that is helpful for tax policy.

OK, that is the idea.= How does it match up with reality = in SSA?

Not clear that land y= ields and investments in land increase as titling proceeds.

Do farmers register l= and that benefits from high levels of investment (bundle idea)?

Do farmers only inves= t in land that is titled (precondition idea)?

Would they have inves= ted in the land anyhow (context idea)?

Carter et al. find th= at there is no evidence in Njoro Kenya for the idea that farme= rs are more likely to invest if titled.

Lots and lots of stud= ies are discussed, the end point is that the methods are complex, and the conclusio= ns are fragile. However, not overwhelming support of the ETLR theory that land titling will lead to incr= eased investment.

Note in Thailand, = 216;most of the impact of title ownership ‘stemmed from the fact that titles increased farmers’ access to formal credit, rather than from the elimination of actual risk to the land rights of the farmers’’<= span style=3D'mso-spacerun:yes'> (p. 139)

No organized credit, = no difference between titled and non titled.=

‘As it turns ou= t, in customary land areas basic use rights seem to be sufficient to induce landholders to invest and the adding of transfer rights…does not appe= ar to significantly improve investment incentives’. (p. 140)

Demand failures of credit.

Smallholders will not= demand credit based on the collateral of their land as they fear losing it. Land as insurance, social security= , hedge against inflation, savings,… pretty steep = slope if you lose it.

L= ack of investment opportunities. No technology / practice / investm= ent out there to be adopted.

Supply failures of cr= edit.

Foreclosure costs hig= h. Can’t get land since politic= ally powerful people own it. Legal system biased by wealth / politics.

Foreclose land held b= y one member of a family while surrounded by others: they burn your crops, throw = rocks at you…

Politics that are fra= gile may lead government to be a less than unbiased judge. Take land and give to another grou= p of supporters, change sides…

System may be dysfunc= tional for recording – multiple claimants, never updated= ; it is not just setting it u= p, it is running it. High per trans= action cost of monitoring and reporting. &nb= sp; This leads people to resort to non-formal transactions, then you have all kinds of claims and counter claims t= o sort out.

One explanation if deficiencies and problems. But active sabotage is also possible. The customary system is seen as more legitimate.

Another supply issue = – land loans are long term investments, banks may be more interested in short term investments. Agriculture= is also potentially more risky than other alternatives. Also administration costs – = lots of little farms, way out there in the rural areas.

Functioning of land m= arkets:

‘First, in ordi= nary circumstances the land market does not appear to be activated by the provision of greater tenure security…. Secon= d, when it is active, most land transfers do not seem to promote efficiency” (p. 151)

63% of land from inhe= ritance, 16% from markets, the rest other means (state allocation,…)

Because of the potent= ial for contestation, get the community involved in approving sales, a restriction = on the autonomy. ‘…i= t is under the pressing need to prevent land disputes and family conflicts from multiplying too rapidly that the state has decided to retreat from the most radical interpretation of freehold tenure and to revert to some customary principles of land allocation.’ (p. 153)

Central registration = of land has not led to a reduction of land disputes but if anything to their exacerbation.

Here we get into some= thing that has echos of the “collectivist” versus “individualist” distinction, but in terms of how we view others in land markets.

L= and alienation to ‘strangers’.

Imperfections in the = land and labor markets arise. Use mach= ines rather than labor, since they will sabotage.

‘Clearly, land = titling is not a sufficient condition for land market activation. We will now see that it is not a necessary condition either’ (p. 157)<= /p>

There is a low level = equilibrium and a high level market equilibrium.<= /span>

Distress sales can mo= ve from the low to the high.

Rwanda= study: out of 247 recorded land sales, almost 2/3rds were for food and medicine, repay debts, or meet social demands. In 30% of cases it was a question = of household survival. 17% were = to meet legal costs from…land disputes!

All of these sales we= re below the minimum standard, and were thus against the law of the country.

De facto rights matte= r. “In Kenya, exercising prerogatives formally attached to full-fledged private property rights…would contravene important community norms…embedded in the indigenous tenure system. (p. 159).<= /span>

Does land move from l= ess efficient to more efficient? = These distress sales indicate it is risk exposure / shocks, not long term efficie= ncy considerations.

Poorer and marginally= more efficient can be driven to sell to wealthier and less efficient.

‘There are actu= ally many grounds to believe that, at the least, there is no systematic tendency= for transacted lands to fall into efficient hands. This is essentially because, in ma= ny cases, the motives behind land purchases are not driven by efficiency.” (p. 161)

“Registration c= an create rather than reduce uncertainty and conflict over land rights” = (p. 164)

Increased security fo= r the title holder may mean increased insecurity for other users. Customary rules may (and often do)= allow access for multiple users. A = formal system with a legal deed holder denies these other claimants. Also, a formal system is a rules b= ased system. Customary has rules, = but is more flexible, context and state dependent.

Also, a formal system= will probably favor those with status in the formal state / economy – those that are already powerful and connected.

“fear of land registration on the part of dominated sections of the population”…chiefs use land titling to snatch land from the poo= r.

1= 66 for more Kenya cleverness.

Another clever strate= gy is that when you have two parallel legal structures (formal and customary), mo= ve between them as you need.

Plus, customary law i= s rather malleable and subject to reinterpretation.= Recall that it was flexible; that makes multiple perhaps inconsistent precedents possible. Also, give the fluid nature of migration, and identity, multiple legitimate claims may coexist.

‘registration c= an be said to supply a mechanism for transfer of wealth in favor of the education= al, economic, and political elite…Titling increases tenure insecurity of = the poor because it places a formidable weapon in the hands of the rich who have both better ability to pay the price of registration and superior knowledge= of government bureaucracy and procedures’ (p. 168-9). “

In the next section, = the case is made that it may in fact be those with access to non-agricultural income= who are best placed to benefit from land markets. If shocks are what impacts people = and causes them to sell land, those who operate according to non-covariate shoc= ks are likely to benefit.

T= able 4.1. <= o:p>

What is good about th= e ETLR:

It is right to point = out that land rights are evolving systems, not static givens.

It is right that ther= e is a trend toward greater individualization and greater ease of transfer.

The issue arises with formalization.

Demand; agents are not homogenous.<= span style=3D'mso-spacerun:yes'> Supply; state is not disinterested= and unitary, responding to the public demand for land titling.

T= he importance of community-based solutions.

‘As a rule, comprehensive land titling is not a cost effective operation in most of SSA= today’ (<= /span>p. 182)

Since states are fina= ncially strapped, and it appears that state intervention is risk enhancing rather t= han reducing, looking at evolving village systems makes more sense.

Why?

First, informal are c= heap and flexible.

S= econd, more explicitly geared to social security.

Third, people agree t= hey are legitimate.

But this is not to romanticize the actual practice of village systems, but a pragmatic assessm= ent of what is likely to work.

S= trengthening local capacities for management, information, and dispute settlement. <= o:p>

A= lso, by leaving it vague, can sort out multiple claims by people who have been invo= lved and are aware of all the nuances.

There may be cases (u= rban areas, new settlement areas, migration) where traditional rules are not goi= ng to work, and formal state sanctioned are needed.