Titling programs: Physical vs. human capital effects

Land titling programs are programs that allocate legal ownership titles to lands’ occupants. Not only titling programs affect human capital, but is also associated with a wealth effect as it induces higher expenditure on normal goods such as home consumption, education and health services. Moreover, titling programs have a substitution effect: the elimination or reduction of expropriation risk makes investment in the home more attractive and therefore increases the opportunity cost of other forms of spending. As for the effect on human capital, it remains ambiguous.

The paper “Inter-Generational Effects of Titling Programs: Physical vs. Human Capital” presented by Néstor Gandelman (Universidad ORT Uruguay) at the GDN’s 13th Annual Conference introduces a simple model illustrating the above with a focus on Uruguay as a case study where human capital investment is proxied by investment in education and healthcare.

The results of the paper confirm that titling programs favor home investment to the detriment of some aspects of human capital investment for children of 16 and under, particularly education investment (school enrolment, private school attendance, extra lessons beyond school) and healthcare investment (medical and dentist visit).

As Néstor pointed out, “aiming good is not enough”! Although effective in several dimensions, titling programs may have some undesired consequences. Therefore, it is advisable to monitor for side effects when implementing programs that change individual investment decisions.

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