The homogenization effect of land titling on investment incentives: evidence from Peru

Abstract

Land titling programmes have been widely promoted as a necessary condition for enhancing farmer's incentives to invest in their land. The justification for public intervention of this type is increasingly questioned on the grounds of its limitation to replace or improve the effect of informal or customary rights already in place. If the main aim of the programme is to formalize previous land rights and its procedure is based on the recognition of informal documents and reliance on community rules, it could in fact contribute to increased farmer's tenure security and therefore boost land investments.We explored this relationship for a sample of Peruvian farmers who were part of a state-led land titling programme that shared the aforementioned characteristics. Using retrospective information on the type of informal documents that parcels had before the start of the programme we were able to categorize the parcels at two levels of initial tenure security. The effect of titling on investments was then analysed for these two groups, using a difference-in-differences estimation technique. The results show that there is a positive effect of titling on the probability of making investments as well as on the value of investments for both groups of parcels, but also prove that the impact of titling is greater for parcels with previously low levels of tenure security. This effect could be almost entirely attributed to changes in farmer's willingness to invest and not to better access to credit.

Public Expenditures, Impact Evaluations and Agricultural Productivity: Summary of the Evidence from Latin America and the Caribbean

“…For instance, "Programa Especial de Titulación de Tierras y Catastro Rural" (PETT) was implemented in 1993 as a massive state-led agricultural land titling program in Peru. Impact evaluations of PETT have found positive and significant impacts on the propensity of farmers to invest in agricultural-related assets (Zegarra, Escobal and Aldana, 2008;Fort, 2008), significant increases in the market value of plots (Torero and Field, 2005), and reallocation of household labor from non-agricultural activities to self-employed agricultural activities on the farmers' own plots (Nakasone, 2011). Zegarra, Escobal and Aldana (2008) found significant effects on income per hectare and investments in permanent crops among beneficiaries identified as being quantity constrained in the credit market.…”

“…On average, after four years in the program, net income was 11,360 lempiras (USD 601) higher for FTDA beneficiaries relative to non-beneficiaries. 40 However, there was no evidence of an effect on household income and expenditures or the proportion of farmers growing horticultural crops.…”

“…15 Both, Foltz, Larson and Lopez (2000) and Deininger and Chamorro (2004), applied multiple regression analysis on crosssectional data and are therefore not considered true impact evaluations. However, they have been included in this report for reference purposes given that both of these studies, as well as Bandiera (2007) and two of PETT's evaluations, Torero and Field (2008) and Fort (2008), were the five studies included in the systemic review of Lawry et al (2014) on productivity.…”

“…42 Maffioli et al (2013), in an extension of the work by Cerdan-Infantes, Maffioli and Ubfal (2009), examined the effects of PREDEG on the adoption of technologies and yields of orchard producers (apples and peaches). The author found evidence that the program had positive and significant impacts on the density of 40 FTDA provided direct technical assistance and on-going training, financial support (in the form of agricultural equipment) and extension services in commercial high-value horticulture promotion and marketing to enable the implementation of technologies. Exchange rate: USD 1 = 18.9 Lempiras.…”

Titling community land to prevent deforestation: An evaluation of a best-case program in Morona-Santiago, Ecuador

“…Land titling increases the security of land tenure on average over time by facilitating access to the enforcement capabilities of the state and providing a ''reference point'' that can be used by traditional institutions to adjudicate land disputes (Fort, 2008;Jacoby and Minten, 2007;Bennett and Sierra, 2014). Past research finds that titles have been useful for improving exclusion of competing land claimants in Madagascar (Jacoby and Minten, 2007), for increasing land values in frontier areas in Brazil because of more secure alienation rights (Alston et al, 1996), and for decreasing the costs of enforcing boundaries (Mendelsohn, 1994).…”