Property rights and risk aversion: Evidence from a titling program. (October 2020)

• Record Type: Journal Article
• Authors: Aragón, Fernando M.; Molina, Oswaldo; Outes-León, Ingo W.
• Is Part Of: World development. Volume 134(2020)
• Publication Date: 2020-10
• Subjects: Property rights -- Security of tenure -- Risk aversion; Economic history -- 1990- -- Periodicals; Economic assistance -- Developing countries -- Periodicals; 330.9
• DOI: 10.1016/j.worlddev.2020.105020
• Languages: English
• ISSNs: 0305-750X

Abstract

Highlights: Evidence from a large urban titling program in Peru. Improved property rights lead to a sizable and persistent reduction in risk aversion. Effects seem to be driven, at least in part, by changes in background risk. Abstract: Evidence suggests that major events, like war or natural disasters, affect risk attitudes. This paper shows that similar effects can also be associated with institutional changes, such as improved property rights. Using the case of a large titling program in Peru, we find that the program reduced risk aversion. The effects are sizable, persistent, and seem to be driven by improved security of tenure. These results highlight an understudied channel through which property rights could shape economic outcomes.