Managerial Economics 2nd Edition by William Boyes

Exercise 16

Land Titling in Argentina
In 1981, about 1,800 families took over a piece of wasteland in San Francisco Solano in the Province of Buenos Aires, Argentina. The occupants were landless citizens organized by a Catholic chapel. The Church and squatters believed the land belonged to the state. Once situated, the squatters had to resist several attempts of eviction, but eventually, the military government lost track of them.
Then once the military government was replaced by a democracy, the squatters brought the issue of ownership to the attention of the government. It was discovered that the land was not state property; the area was composed of different tracts of land, each with a different legal owner. So the Congress of the Province of Buenos Aires ordered the transfer of the land from the original owners to the state in exchange for a monetary compensation. About 60 percent of the land was sold to the government, and these parcels were deeded to the squatters; legal titles secured the property of the parcels. The other original owners refused to give up the land, arguing that the compensation was too low. They contested the government compensation in the Argentine courts, a contest that continued for more than 20 years.
As a result, there are two divisions of land in the occupied region: Some of the squatters obtained formal land rights, while others are living in the occupied parcels without paying rent but without legal titles. Although the groups shared the same household characteristics before the ownership and although they lived next to each other for 20 years, the outcome of their ownership arrangements has been dramatically different. Those with title invested in their properties, whereas those without title did not. As a result, there is a significant difference in the quality of housing on the untitled and titled properties. The titled properties have been upgraded, expanded, and improved; the untitled properties remain run-down, deteriorated, crumbling shanties. Not only is the housing different, those with title behaved differently than those without title: They had fewer children, and the children acquired more education and had better health.
Why does the title to property matter?