There remain debates on the association between secure property rights and long-term economic growth. Some evidence support this association, others critique the methods of analysis used in studies which find an association. Some studies argue that the link is not observed in important case studies; and others query whether strengthened property rights are the most important determinant of growth.
This paper reviews the evidence on the relationship between secure property rights and development focusing on Africa, and identifies evidence gaps. It reviews the strength and quality of available evidence in three specific areas: property rights and economic growth at a macro level; property rights and rural household welfare; property rights and urban household welfare.
Key findings:
- There is evidence that titling raises the perception of security among some poor urban households which, in turn, leads to additional investment. However, investment can be influenced by other factors and there are barriers which prevent poor urban households from benefiting from titling. A high proportion of poor urban households rent their property, or cannot afford the expenses of titling without substantial cost to government for subsidies. Many developing countries also a lack the professional and administrative capacities to execute large-scale titling programmes. While there is evidence that titling can stimulate investment by poor urban households in some contexts, these studies do not provide evidence of the extent to which these investments were financed with credit from banks. A small body of evidence indicates that banks use other criteria in loan decisions, particularly proof of regular employment and income. In addition households are reluctant to put their properties at risk by using their newly acquired titles to secure bank loans. Instead, they tend to fund improvements through other means. Evidence does not support the view that titled rural African households gain access to credit more regularly or easily than other households which suggests a limited use of the collateralisation effects that formal title potentially confers.
- There is evidence that gender discrimination occurs during titling of urban households. However, there is no evidence of the extent, strength and impact of this discrimination. In the case of rural households, there is inconsistent economic evidence about whether individual private tenure provides better conditions for women’s empowerment than alternative systems, including customary tenure.
Evidence gaps:
Property rights and economic growth
- Collection and analysis of more and better quality micro level data on the impact of secure property rights on firms’ investment decisions within countries to complement and test the results from cross-country analysis; data on the impact of secure property rights on collateral-based finance at a macro/large firm level; data on the impact of secure property rights on allocative efficiency at a macro/large firm level; data on the impact of more formal property rights on the distribution of property and benefits from growth at a national/cross-country level.
Property rights and rural household welfare
- Further research and evidence on how property strengthening initiatives affect women with different statuses; whether formalised customary land recognition is important as a means of protecting land against land grabbing; disaggregated country studies, focusing at the sub-national and national levels, to clarify the importance of titling in specific situations and the impact of stronger property rights on welfare benefits for rural dwellers through channels other than raised income levels.
Property rights and urban household welfare
- Further research is needed in identifying the extent to which titling leads to additional investment, especially where households already perceive enough de facto security to invest; how effectively titling encourages investment compared to other interventions regarding property ownership; to what extent and how titling results in women exercising more control over loan and investment decisions, leading to their greater empowerment; to what extent poor households borrow more from banks when they receive titles and to what extent they use their titles when they borrow; to what extent funds realised by households when they sell their properties after titling result in improvements to their welfare and incomes; the impact on household welfare and incomes of those renters who stay and those who depart as a result of titling; and what household welfare and income outcomes specifically result from investing more loans obtained from banks by using a new title as collateral compared to those that specifically result from more investments in properties that have been encouraged by titling.