Volume 6

How to Make Land Titling More Rational

Benito Arruñada

Discussions on economic development have lately focused on the role of institutions in protecting property rights and reducing transaction costs. In particular, the idea has taken root that development would benefit from facilitating access to legality. It is thought that, if those in possession of even small buildings and plots of land have good titles, they will enjoy better incentives to invest and can use these real assets as collateral for credit. Similarly, if business entrepreneurs are able to “formalize” (for our purposes, publicly register) their firms easily, they will benefit from operating them as legal entities. For instance, they will have access to the courts for enforcing contracts and settling disputes, and will also be able to obtain credit and invest more. Consequently, firms will grow faster and be more productive.

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