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THE IMPACT OF HOUSE TITLING: Evidence from a natural experiment in Uruguay

THE IMPACT OF HOUSE TITLING: Evidence from a natural experiment in Uruguay. Néstor Gandelman Universidad ORT Uruguay First Discussion Seminar Titling in Latin America: Effects and Channels March 30, 2007. Problems. This is a very preliminary draft.

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THE IMPACT OF HOUSE TITLING: Evidence from a natural experiment in Uruguay

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  1. THE IMPACT OF HOUSE TITLING:Evidence from a natural experiment in Uruguay Néstor Gandelman Universidad ORT Uruguay First Discussion Seminar Titling in Latin America: Effects and Channels March 30, 2007

  2. Problems • This is a very preliminary draft. • There are at least 3 issues were I need feedback from you: • . Which should the focus of the paper be? • . Which are the “better” comparisons? • . How far to go with the controls?

  3. The Natural Experiment • In the mid-70s a public institution (INVE) built 13 small neighborhoods (communities). • In all cases purchase agreements were signed and implicit mortgage contracts were in place. • The communities were built in land owned by: • INVE (9) • Municipality (3) • Unknown (1)

  4. The Natural Experiment • In 1977 the INVE was eliminated by law and its goals and property were assigned to the state-owned mortgage bank, (BHU). • Over the following decade various institutions were officially in charge of their management. • Finally, on March 1987 the Municipality rejected the last agreement and informed the BHU that it should take care of the communities built in its land.

  5. The Natural Experiment • In December 1987, the Executive branch of Government designed a task group to study the situation of the communities with representatives of: • the Ministry of Education, • the Ministry of Labor and Social Security, • the BHU and • the Municipality of Montevideo.

  6. The Natural Experiment • The conclusions of this task group were: • No institution was really taking care of the management of the communities. • It would imply an excessive cost for the BHU to assume it. • It was in the best interest of the BHU to sell the houses to the actual occupants in whatever price they were able to pay.

  7. The Natural Experiment • The board of the BHU agreed and • Set a nominal price of 10U.R. equivalent to approximately $100 for those occupants that could not prove to have made any previous payment. • Those that made previous payments only had to pay for the titling costs (2U.R approximately $20).

  8. The Natural Experiment • But the assignment of the formal property rights could be done only in 3 communities. • Why? • Because in the others there were no registered plans (area maps with the land division among houses) in the Municipality of Montevideo.

  9. 18 de Julio- Independencia Lavalleja 25 Agosto- Las Piedras

  10. The Treatment Communities 18 de Julio - 34 houses 25 de Agosto - 52 houses Lavalleja - 84 houses

  11. Census Sample(1/3) Nothing The Control Communities

  12. Census of the 3 treatments: 18 de Julio - (34) 25 de Agosto - (52) Lavalleja - (84) Total: 170 Census of 2 controls: Independencia (98) Las Piedras (36) Total: 134 Total 469 houses to be surveyed Sample 1/3 of 5 controls 19 de Abril (98) Sarandí (130) Rincón (52) Guayabos (150) Grito de Ascencio (65) Total:495 Sample:165 The survey

  13. The survey • Census of 3 treatments: • (done almost no rejection) • Census of 2 control: • (done almost no rejection) • Sample of 4 controls: • 1/3 of community size with no “house” replacement in case of rejection or not finding anybody. • (80% done)

  14. Comparisons • Exercise 1- Independencia vs 18 de Julio • (contiguous, same owner, census data) • Exercise 2 - Las Piedras vs 25 de Agosto • (contiguous, different owner, census data) • Exercise 3 – All treatments vs 4 controls • (non-contiguous, same owner, sample-census data) • Exercise 4 – All treatments vs All controls • Exercise 5 – Treatment and Controls vs Household survey data (city or neighborhood)

  15. The survey • The survey covers: • basic socio-demographic data • housing conditions • entrepreneurship • credit • happiness • external appearance • health • education • work • income

  16. Home investment • The type of effects we are looking are investments which may suffer a hold up problem vs investments that can be taken if they have to move.

  17. Entrepreneurship and Credit • Households in the treatment communities have more access to formal credit than the control communities. • But ownership documents were not a relevant requisite to access to credit. • Thus, the channel does not seem to be through the transformation of houses into colletaralized capital.

  18. Entrepreneurship and Credit • We find that there are more productive activities in the control communities. • And there is no participation of the formal credit system in the funding of any of them (control + treatment). • Moreover the larger access to formal credit from the treatment communities does not pass through to productive activities.

  19. Health • Is there a channel from housing living conditions (home investment) to health outcomes?

  20. Others • Education • Labor market and Income • Values and happiness • Nothing clear yet

  21. THANK YOU

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