ABSTRACT
This study investigates the impact of property informality on rural land prices in Colombia. It utilizes data for 16 land size categories for a fifth of Colombia’s municipalities. It employs the Gaussian copula approach to overcome endogeneity issues. The main finding is that an exogenous variation of property informality significantly reduces rural land prices for properties larger than three hectares, but not for smaller ones. Property informality is strongly endogenous to land prices (inversely for small properties but directly for larger properties). Our results indicate that exogenously reducing property informality of large landholdings by one standard deviation could increase their prices by 24%, equivalent to 44% of the municipalities’ GDP. These findings suggest that addressing property informality could substantially enhance the economic value of rural lands above certain size threshold, which would strengthen local tax revenues and improve rural economic conditions. Updating of cadaster values of large lands, which is often opposed by landholders, is crucial to unlock the potential of land titling.
Lora, Eduardo and Benítez-Rueda, Miguel and Rueda-Sanz, Alejandro, Property Informality and Its Effect on Rural Land Prices in Colombia (October 24, 2024).
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