Some economists argue that ensuring people have titles to their land can ensure a feeling of security and boost production. … The greatest proponent of the argument is Hernando de Soto, a development economist who has managed to win praise from the likes of Bill Clinton and the libertarian Cato Institute.
There is plenty of evidence that land rights are connected to productivity, but new research out of Madagascar shows that it is not always the case.
Duke University researcher Marc F. Bellemare tested whether the land rights component of a $100 million Millennium Challenge Corporation (MCC) compact with the government of Madagascar. He found that the provision of formal land rights, meaning land titles, had not measurable impact on productivity when comparing farmers that did and did not benefit from the MCC compact.
Holding a land title is not sufficient if structures are not in place to enforce land ownership and dole it out.
This paper studies the relationship between land rights and agricultural productivity. Whereas previous studies used proxies for soil quality and instrumental variables to control for the endogeneity of land titles, the data used here include precise soil quality measurements, which in principle allow controlling for the unobserved heterogeneity between plots. Empirical results suggest that formal land rights (i.e., land titles) have no impact on productivity, but that informal land rights (i.e., landowners’ subjective perceptions of what they can and cannot do with their plots) have heterogeneous impacts on productivity.
That’s the abstract of my paper titled “The Productivity Impacts of Formal and Informal Land Rights: Evidence from Madagascar,” which has just been accepted for publication in Land Economics.
The paper is notable for a few things. First, it shows that land titles have no impact on agricultural productivity in Madagascar, a country where the US government had planned on spending $110 million dollars on various initiatives aimed at “assisting the rural population to transition from subsistence agriculture to a market economy,” including via land titling. Continue reading →
From a new article by Jean-Marie Baland and Jim Robinson in the American Journal of Political Science:
In this article, we argue that when patron-client relations are grounded in economic relationships, such as between landlord and worker, we should expect clientelism to influence not just how public policy, the state, and the political system work, but also how the economy works. We develop a simple model of the economic consequences of electoral clientelism when voting behavior can be observed. Landlords/patrons provide economic rents to workers, and in exchange workers vote for parties favored by landlords. As votes are used by the landlords to accumulate political rents, vote control increases the demand for labor and for land. The model implies that the introduction of the Australian ballot, which destroys this form of clientelism, should lead to a fall in the price of land in those areas where patron-client relationships are strongest. We test the predictions of the model by examining in detail the evolution of land prices in Chile around May 31, 1958, for which we collected original data. A characteristic of rural Chile at this time were patron-client relations based on the inquilinaje system, by which a worker, the inquilino, entered into a long-term, often hereditary, employment relationship with a landlord and lived on his landlord’s estate. We show that the introduction of the Australian ballot in 1958 led to a fall of about 26% in land prices in the areas where these patron-client relationships were predominant.
This article is a followup of sorts to Baland and Robinson’s 2010 American Economic Review article, in which they show that the introduction of the secret ballot in 1958 in Chile led to greater support for labor-friendly political parties.
Where there are posted restrictions, most European countries take speeding very seriously and levy hefty fines. The latest case in point is a 37 year-old Swedish man who was clocked at 180 miles per hour on a motorway between Bern and Lausanne in Switzerland.
Unfortunately for this driver of a new Mercedes-Benz SLS AMG, Switzerland doesn’t have fixed fines for speeding. Instead they use a formula similar to that in Finland where the fine is calculated based on the vehicle’s speed and the driver’s income. Back in 2002, Nokia executive Anssi Vanjoki had to pay a fine of $103,600 for going 47 mph in a 31 mph zone.
A student in my Law, Economics, and Organization seminar mentioned the article quoted above last week when I was explaining the difference between the twin concepts of absolute and relative risk aversion.
In economics, risk is not so much about what most people call risk as it is about gambles over income. In other words, risk preferences are defined over income or wealth. See here for an excellent discussion starting on page 64 in chapter 6 of David Friedman’s Law’s Order. So why would Switzerland and Finland have speeding fines that vary with income? Continue reading →