The Conversion of Customary Land in Developing Country Cities

As cities in developing countries grow and expand spatially, land use changes from
agricultural to residential and land tenure is converted from customary to statutory property rights. To explore these two joint processes, we propose a land-use and land-tenure conversion model where brokers purchase agricultural land from customary possesors and transform it into residential plots. Brokers may also attempt to establish a property right to reduce tenure insecurity before reselling the plot onto the residential market. This generates a mixed land-use equilibrium with statutory and non-staturory residential plots that coexist with customary agricultural parcels. In the presence of information asymmetry between customary farmers and brokers, a market failure may emerge whereby the conversion process is hindered and the city size ends up being too small. An empirical analysis using Malian data validates the key features of the model captured by the land gradients, the ranking and the variance of land prices.

Keywords: Urbanization, land markets, property rights, market failure
JEL codes: O43, R14, P14

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