Tenure Insecurity, Adverse Selection, And Liquidity In Rural Land Markets

Derek Stacey

No 1269, Working Paper from Economics Department, Queen's University

Abstract: A theory of land market activity is developed for settings where there is uncertainty and private information about the security of land tenure. Land sellers match with buyers in a competitive search environment, and an illiquid land market emerges as a screening mechanism. As a consequence, adverse selection and an insecure system of property rights stifle land market transactions. The implications of the theory are tested using household level data from Indonesia. As predicted, formally titled land is more liquid than untitled land in the sense that ownership rights are more readily transferable. Additional implications of the theory are verified empirically by constructing a proxy variable for land tenure security and studying the differences between markets for unregistered land across Indonesian provinces. Regional land market activity is appropriately linked to the distribution of the proxy variable.

Keywords: Competitive Search; Land Markets; Tenure Security; Liquidity (search for similar items in EconPapers)
JEL-codes: D23 D83 Q15 R23 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2011-04
New Economics Papers: this item is included in nep-agr, nep-cta, nep-dev, nep-sea and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:1269

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