In Search of the Magic Formula

All of us have heard about government schemes to regularize slum settlements by giving legal title to the poor. Does it make economic sense? Does it really lead to improvements in income, education or health? Does this eventually lead to a more healthy and prosperous urban low-income group, which creates revenues for the government through taxes? Does it reduce government expenditure on health and other subsidies? This is the topic of my new research paper, done along with Dr. Venky Panchapagesan and Dr. Madalasa Venkatraman at IIM Bangalore.

A little background:

Land titling and regularization is not new to India - we've been doing it since the 70’s. You've probably heard of the new (and large scale) programmes announced recently in Odisha and Delhi. It's not just India - across the world, governments of developing countries have adopted land titling as a policy tool to address issues of urban poverty and informal urban settlements. This is based on extensive publications by global researchers (de Soto and others), explaining how giving property rights to slum dwellers results in increased labour participation, better credit access as well as improvement in their education and health. It seems logical, doesn't it?

Our study:

In our paper, we attempted to check the situation on the ground, to provide the Indian government with an economic rationale for providing property rights to slum dwellers. Through our study of 619 slum households in Mumbai and Bangalore, we assessed the impact of land titling on the poor, and tried to see what socio-economic benefits accrued to the government (via increased taxes and reduced subsidies).

The results:

Our cross-sectional studies showed that for the slum households we studied, giving property rights did not result in significantly improved outcomes with respect to income, expenditure, financial savings, education, house improvement and credit access. Therefore, there were no significant resultant economic benefits to the government in the form of additional taxes or reduced subsidies.

Implications:

Our findings question the efficacy of using property titling as a blunt instrument to address the issues facing informal urban settlements. We think that further longitudinal study of other endogenous and exogenous factors is required to understand the long-term impacts. It is a complex issue, and titling as a one-size fits all solution is not really working.

What now:

Our working paper is here on the IIM Bangalore website; for further comment and debate. We have received some feedback, which are now incorporating. It is a working paper, thus it is very much open to improvement. Your comments are very welcome. This is a major issue, impacting millions.

Please note, the paper is not talking about psychological or emotional benefits (having one's own house is a major source of security, we all know. And it helps women get toilets inside homes. I work with slum communities, so please, I don't need an education in the many positive aspects of titling). This paper is looking at quantifiable significant improvements in income, health, education, credit, etc. And the data seems to suggest we have still to figure out the magic formula.

Link to working paper is here: https://www.iimb.ac.in/node/6853