At the End of the Beginning: The Formalization of Property Rights in Emerging Markets

Policy Paper
Oct. 1, 2002

True or false? Enabling citizens to have a secure claim to their fixed property—homes and land—by insightfully simplifying and thoroughly redesigning a formalization process will result in massive capital flows to the middle and lower classes from both domestic banks and foreign investors. If so, who should manage this transformation that will have such dramatic impact on capital markets and both the public and private sectors? 

This paper provides the tools required to answer these questions. First, the process of securing fixed-property rights is briefly introduced and discussed. Further, a graphical supply-and-demand illustration is offered to explain, albeit inconclusively, how this process can liberate so much capital. Next, property rights are contextualized in terms of the economics of information—a discussion that will yield far stronger conclusions. Finally, some caveats that should always be kept in mind during conversations regarding land titling and fixed-property rights are included. 

These analyses lead to the conclusion that the correct answer to the first question is unequivocally true. The answer to the second is that the public sector should lay the foundation of the transformation that the private sector will ultimately affect.