Urbanization and land property rights

We analyze the joint dynamics of land property rights and urbanization, a key yet underexplored relation that underpins the process of economic development. Using a dynamic stochastic model of urbanization with endogenous demand for property rights over land use, we demonstrate that the costly provi...

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Bibliographic Details
Published in:Regional science and urban economics 2018-05, Vol.70, p.246-257
Main Authors: Cai, Yongyang, Selod, Harris, Steinbuks, Jevgenijs
Format: Article
Language:English
Subjects:
Agglomeration effects
Developing countries
Economic development
Elites
Endogenous
Externality
Land property rights
Land tenure
Land use
LDCs
Property rights
Residential informality
Stochastic models
Stochasticity
Urbanization
Urbanization dynamics
Welfare
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Summary:We analyze the joint dynamics of land property rights and urbanization, a key yet underexplored relation that underpins the process of economic development. Using a dynamic stochastic model of urbanization with endogenous demand for property rights over land use, we demonstrate that the costly provision of those rights may result in both residential informality that can persist over time and suboptimal urbanization whereby cities are too small and insufficiently productive. In developing countries, because land administrations in charge of issuing titles are difficult to reform, achieving the second best may require acceptance of some level of informality in spite of the negative externalities stemming from informal land tenure and informal settlements. This may not be easily implemented as urban elites may favor overall welfare-reducing policies that over-evict informal dwellers. •Costly land formalization causes cities in developing countries to grow informally.•Residential informality may remain in the long run when institutions are not improved.•Unaffordable property rights can hinder urbanization and make it less productive.•If institutions cannot be improved, some informality is preferable over evictions.
ISSN:0166-0462
1879-2308
DOI:10.1016/j.regsciurbeco.2018.04.007