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Loss of Plot Formality Through Unregistered Transactions

Evidence from a Natural Experiment in Peru

Oswaldo Molina

Agosto 2014, inglés

Titling programs are considered by policymakers as an effective instrument for reducing poverty in developing countries. However, they have focused only on the process of granting the title; but have not paid attention to which conditions are necessary to maintain the formality of future plot transactions. Evidence from urban Peru shows a low registration rate, which considerably reduces households’ ability to reap the benefits of tenure security. This paper identifies the determinants of registration of plot transactions and examines the impact of a modification in the registration process in 2004, involving higher fees and a more complex procedure, due to a change in legislation. Estimations from a duration model demonstrate the importance of education, income, and fees to the likelihood of registration. In addition, results from a difference-in-difference duration model indicate that the estimated average treatment effect of the change in registration process implies a reduction in the probability of registration of almost 3 percentage points, which represents a decrease of 34 percentage of the initial registration rate. These results are robust to the performance of falsification tests with different placebo interventions. Also, evidence suggests that there are negative effects of the change in registration process on some benefits associated with titling. Particularly, households who live in areas where the registration process became more complicated invested less in housing.

Keywords: tenure regularization, property rights reform, titling programs, informality, title registration, loss of formality, natural experiment, Peru.