Secure property rights are considered a key determinant of economic development, but examining the effects of land titling programmes is complex. Are they a tool for rapid poverty reduction? Would credit accessed through land ownership be invested as capital in productive projects, increasing labour productivity and income? This study of land allocation in Argentina examines the effects on a very deprived group, concluding that land titling can be an important tool for impacting poverty. However, the programme did not open up a rapid route to credit access and entrepreneurial income, but a slow channel of increased physical and human capital investment, contributing to poverty reduction for future generations.
In today’s developing world, millions of people are living in urban dwellings without possessing formal property rights. This constitutes a severe limitation for the poor, impeding the transformation of any wealth into capital. Individuals under-invest if others can seize the fruits of their investments. Proper titling could allow the poor to collateralise the land, or to transfer parcels in which they have invested. Additionally, formal titles provide poor families with the possibility of a valuable insurance and savings tool for protection during bad times and retirement. This avoids the need to rely on extended family members and offspring as insurance mechanisms.
This study looks at a situation in Buenos Aires in 1981, where a group of squatters occupied an area of wasteland in the outskirts of the city. An expropriation law was passed, ordering the transfer of the land from the various original owners to the state, to entitle it to the squatters. Only some of the owners complied, resulting in one group of squatters obtaining formal land rights, while others lived in the occupied parcels without paying rent, but without legal titles.
Untitled and entitled households were extremely similar before titling, the parcels they inhabited were identical, and the allocation of property rights did not depend on the characteristics of the squatters. This natural experiment thus provides an opportunity to examine the causal effects of land titling. It demonstrates significant impact of titling on housing investment, household size and child education, but only modest effects on access to credit and no effect on improvement in employment status and labour market performance:
- Increased housing investment: The constructed surface of housing among the titled group increased by 12 per cent, while an overall index of housing quality rose by 37 per cent.
- Reduced household size: Household size in the titled group decreased, (5.11 people relative to 6.06 in the untitled group), both through fewer extended family members and fewer children. This could be due in part to less need for extended family and children as insurance for old age.
- Improved child education: Children from the households that reduced fertility showed significantly better educational achievement, with an average of 0.69 more years of schooling and twice the secondary education completion rate.
- Modest credit effects that do not translate into improved employment status: Credit is not an automatic entitlement for those who have received land allocation without accompanying employment-related qualifications such as minimum tenure and high wages. Mortgage loans may not be invested in business projects as land is too valuable to impoverished owners to be jeopardised in an entrepreneurial activity.
While the titling programme did not open up a rapid route to credit access and entrepreneurial income, it did contribute to longer-term physical and human capital investment. The reduction in household size allowed greater investment in education, which increased children’s long-term earning potential, arguably contributing to poverty reduction in future generations.
