Titles for me but not for thee: transitional gains trap of property rights extension in Colombia

Abstract

I apply Tullock’s transitional gains trap to the formalization of property titles in Latin America to understand public choice problems in mending institutions. In an area where land is owned by formal and informal institutions, policies to extend property rights will not be supported by voters holding legal title because it will devalue their property. To test this I use data from Colombia where a peace deal to end a 50-year conflict with Revolutionary Armed Forces of Colombia rebels was reached in 2016 and put to a public referendum. The deal included formalization of property titles across the nation as well as an end to the conflict. Using municipal-level data on voting and property ownership and controlling for conflict history, I find potential losses to formal property holders pushed median voter preferences toward dissension. A 1% increase in legally titled land increases dissenting vote share by 3% points. These results are relevant to institutional reforms anywhere with corrupted property rights.