Where Do Property Rights Matter More?

Existing empirical research has established that stronger legal claims to property in urban areas have significant market value, but previous studies examine this question in a single city or market. This paper is the first effort to test theories about the role of market context in the demand for property rights in urban areas (Demsetz, 1967). In Mexico, properties with full title are 11 percent more valuable than those without, ceteris paribus, but this difference in value varies substantially across cities. In this paper, I use detailed household survey data in a multilevel regression model to examine the determinants of this variation. Characteristics of cities such as the share of the population with a college education and civic participation, as well as the regulatory environment, have a greater impact on the value of property rights than economic variables. These findings suggest the Mexican government should reconsider the purpose and targeting of subsidies for property titling.