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    This blog highlights effective ideas in the fight against poverty and exclusion, and analyzes the impact of development projects in Latin America and the Caribbean.
  • How effective are land property rights interventions on improving investments and agricultural productivity?

    10
    Nov
    2015

    By

    by Mario González Flores and Leonardo Corral

    Recent studies show that de jure recognition of tenure through the provision of a registered title or certificate boosts productivity by 40%; and increases consumption or income of beneficiary households by 15%.

    land property rights interventions

    Image: IDB

    Access to land and the ability to make productive use of that land is critical to poor people worldwide (Deininger, 2004): it can provide a foundation for economic and social development and help the rural poor cope with unexpected challenges.

    Yet, even if households have access to land, a significant percentage of farmers have no access to a land title that can provide tenure security.

    Without a system that clearly defines the rights of access to land, production is more difficult to carry out and incentives are weakened for land-related long-term investments that could raise its productivity (Norton, 2004).

    Recognizing the importance of having access to land and a system that provides land tenure security and rights, scores of countries have undertaken systematic land titling or certificate interventions with the goal of formalizing property rights to enhance land tenure security.

    The developmental impacts of these interventions have been subject to much debate, especially in the past two to three decades and historical evidence with regard to formalization programs has been mixed (González et al., 2010).

    However, a recent systematic review by Lawry, et al. (2014) provides important evidence that corroborates some of the more consistent results found in previous studies, while it also identifies the main gaps remaining in the literature.

    As far as we are aware, this is the first meta-analysis that applies very rigorous and extensive criteria for considering the inclusion of studies. Criteria for inclusion included geographic distribution; population of interest; type of intervention; comparability across impact and outcome indicators and  type of mechanisms that lead to impacts; and study designs and econometric modeling. Indeed, while the search identified over 27,000 studies for consideration, after applying their inclusion criteria, only 20 studies were included in the meta-analysis: 5 in Latin America; 7 in Asia; and 8 in Africa.

    The main results are as follows: de jure recognition of tenure (through the provision of a registered title or certificate) boosts productivity by 40%; and increases consumption or income of beneficiary households by 15%.

    As for the mechanisms of impact, the results show no impact on credit access or amount; however, the review finds an increase in the probability of long term investment by about 5%.

    Importantly, the authors find that in the Latin American and Asian cases, the impact on productivity is quite clear, while it is not the case for the African cases. On the other hand, the impact of these interventions on investments is positive and consistent across the three regions.

    In terms of primary gaps, the review shows that little research has been done on the impact of these programs on leasing or selling land, gender equality, and on the impact of community titling.

    Importantly, only very few papers look at the impact of credit access and even fewer look at credit amount.  This raises an important and puzzling question: if these programs are having a consistent impact on investments, how are these investments being financed?

    The authors identified five methodological weaknesses in the studies:

    1) studies gloss over the mechanisms of impact,

    2) the vast majority of studies do not explain how treated and control households were selected (there might be placement or self-selection bias),

    3) only two studies clearly controlled for self-selection,

    4) no study collected data before the program was implemented,

    5) none of the studies were randomized control trials.

    In addition, other weaknesses glanced over by the authors include,  70% of studies only use cross-sectional data; and the average timespan between implementation and the evaluation was at times very significant (for 25% of studies the time was 15+ years and in two extreme cases the time was 29 and 44 years!).

    Although these 20 studies made the final round for inclusion, these are potentially serious technical weakness and interpreting the relationship between property rights and outcomes as the causal effect has to rely on strong assumptions, as many unobserved confounding factors could drive the observed correlations.  And even in the case of panel data, if an evaluation is done 25 or 49 years after the implementation, then the assumption of parallel trends is unlikely to hold.

    Overcoming these technical weaknesses will require improvements in the design and methods utilized in evaluations of property rights interventions. Ideally, retrospective evaluation will give way to well planned and executed prospective impact evaluations where many of the pitfall alluded to above can be specifically addressed ( Gignoux et. al.  2013).

    Nevertheless, Lawry et al., (2014)  present two key policy messages that arise from their review. First, tenure security, via de jure recognition of tenure, is important. Second, productivity gains may take time to materialize, the effects vary across cases, and they likely depend on other supportive conditions, such as the performance of factor and product markets.

    For these reasons, policy makers should consider and assess a variety of models, appropriate to regional and national contexts.

    In general, the results and policy implications for Latin America are consistent with a previous systematic review undertaken by the IDB’s Office of Strategic Planning and Development Effectiveness (Gonzalez et. al., 2010)  in their first Special Topic Development Effectiveness Overview: Assessing the Effectiveness of Agricultural Interventions (pp. 88-93; 178): consistent results were found on the link between land titling and increased investments, as well as property values; no effect on credit; no effect on land sales, but an increase in land rentals.

    These two reviews provide significant evidence on the importance of enhancing tenure security through land property rights interventions. The findings are consistent with conventional economic theories of property rights. The reviews  also highlight important gaps in the literature. They should serve as an essential guide in designing these types of interventions and their evaluations.

     

     

    Mario González Flores is an Evaluation Economist (Consultant) for the Office of Strategic Planning and Development Effectiveness at the Inter-American Development Bank, and an Adjunct Instructor at the School of International Service of American University in Washington, D.C.

    Leonardo Corral is Principal Economist in the Office of Strategic Planning and Development Effectiveness at the Inter-American Development Bank. His research interests focus on rural factor markets and natural resource management.

    2 Responses to “How effective are land property rights interventions on improving investments and agricultural productivity?”

    • Vidhya :

      This was a great read! I worked for a short time with Habitat for Humanity Australia and the focus was on land tenure issues in the Asia Pacific. An interesting concept raised by one of the researchers was that land titling through formal legal mechanisms was often 1) long and unnecessarily bureaucratic, and 2) required extensive proof of possession and use of the land, which most low-income populations (especially squatters) are unable to physically prove through documentation. In such cases, it may be more helpful to have a spectrum of legal mechanisms (from non-formal titling to formal titling) whilst legal interventions are implemented.

      Sidenote: These concepts are extrapolated in the Annual Shelter Forum Report on http://www.shelterforum.info/category/australia/, if you’re interested in reading more!

      • Mario :

        You raise an important point in terms of instances where the process to formalize land may be long and bureaucratic; however, it is important recognize that in many instances, such as in the case of Latin America as noted by Lawry et al., (2014), de jure tenure security might be the more effective means to enhance land tenure security given the history of the region. In this sense, even if this process is long and bureaucratic this might be a “small” price to pay in the short-term so that households can benefit from having a formalized and registered title in the long-run. On the other hand, in terms of low-income populations not being able to provide the necessary documentation; this is typically not the case in rural areas of Latin America where tightly-knit groups have lived in the same communities for many generations. Yet, and as you rightly noted, providing the required documentation might be difficult or not be possible in the case of squatters, but this involves a much more complex process to formalize their tenure and it therefore requires a different type of intervention than the ones covered in the Lawry et al., (2014) study.

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