Enabling Fiscal Capacity and Good Governance Through Urban Property Formalization

Researchers: Francisco Garfias (GPS) and Darin Christensen (UCLA)
Location: Colombia

Secure property rights over land promote economic development and help governments enhance their fiscal capacity. Yet, despite individual and social benefits, most land in the developing world is not registered. Globally, three-quarters of land parcels remain unregistered, and in Latin America, an estimated 70 percent of land plots are undocumented. Property rights promote economic development through a number of mechanisms, yet in Colombia and other developing countries, the high costs of registering land deter households from seeking formal titles.

This project brings empirical evidence to bear on this puzzle: we estimate of household demand for formalization, as well as the benefits of formalization for both households and municipal governments. In short, we assess both the costs and benefits of formalization for both households and government. Partnering with Suyo, a social enterprise in Colombia, we plan to implement a field experiment that estimates the demand curve for land formalization and that evaluates the effects of formalization on local fiscal capacity and on private investments by households. 

Suyo can quickly and reliably determine the cost of any required land formalization service by using a mobile-based property assessment application. As they scale, Suyo is considering releasing a version of the mobile application, which would allow households to freely assess the legal status of their property and (if required) estimate the costs to formalization. Suyo is now positioned to pilot their mobile assessment tool and offer formalization services to low-income residents in several Colombian cities.

This research contributes to our understanding of whether, and through what mechanisms, secure property rights increase household investment and tax compliance. In addition, our evaluation will expand the pilot of Suyo’s mobile property assessment tool—an ICT product that makes it much easier and cheaper for households to determine what steps are needed to register and formalize their properties.