Titling, Credit Constraints, and Rental Markets in Rural Peru: Exploring Channels and Conditioned Impacts

This paper presents an impact evaluation of Programa Especial de Titulecion de Tierras (PETT), a rural titling program created in Peru in 1992. The evaluation did not indicate any positive effects during the period 2004 - 2006 for a limited sample of farmers in the Sierra and Coast regions. The paper further examined two important channels, namely, credit access and use of land rental markets. Study findings revealed that:

• Land titling had significant impacts on agricultural income and investment in the case of farmers who are quantity constrained;
• Use of conservation practices dropped due to more intensive use of land;
• Density of titling is an important condition for the activation of land rental markets;
• Titled farmers in areas of low density of titling had fewer incentives to supply land than those in high density areas.

Finally, the paper states that a strategy of massive titling might generate significant reduction in transaction costs. This impact on supply of land rentals is especially important if farmers are credit-constrained, and use this market to self-finance agricultural and non-agricultural activities.