Economic Impacts of Land Titling: Investment Incentives versus Rental Incentives
Date and Location
Tuesday, May 25, 2021, 4:10 PM - 5:30 PM
Abstract
Improving security of land property rights is often credited to enhance incentives of making land-attached investment and renting out land. However, almost no academic research has been done on their interaction which is likely to be competing. Investigating this could be relevant for policy makers, who want to employ tenure security improvement programs like land titling to increase land access for the poor and thereby reduce poverty by enabling them to utilize family labor endowment more effectively. This paper attempts to fill the aforementioned gap by exploring economic consequences of tenure security improvement under unequal land size and security distribution (a stylized environment in some LAC countries like Nicaragua). Specifically, I build up a partial equilibrium model incorporating the agency cost of hired labor and use it to explore the competing incentives associated with improvements in land tenure security. Because changes in tenure security are likely to impact factor prices (wage and land rental rates), I then endogenize them using a multi-agent simulation approach. Results indicate the following potential impacts of increasing the lower bound of land tenure security in an unequal agrarian economy: (1) land rental market expansion may be limited as renting out land may induce cost of reducing attached investment for landlords; (2) unlike landed, landless may have little income gain since they only benefit from reduction of land rental rate or increment of wage rate which may be small in equilibrium; and (3) given the substantial reduction of costs paid for protecting land ownership, gross income gain may be large while income inequality may also rise, although aggregate agricultural output and production efficiency may not witness any sizable increment.
