Customary Land Conversion in African Cities

Abstract

In many developing countries, especially in Sub-Saharan Africa, urban growth is accompanied by the conversion of land tenure from traditional customary arrangements to formal or informal property rights. This paper studies this conversion process in an urban economics model in which urban workers purchase unsecure land from customary sellers and attempt to transform it into residential land with statutory property rights. The spatial equilibrium includes a mix of land uses and rights in which residential land is held with either statutory and non-statutory rights, and agricultural land remains in the customary tenure system. Because customary arrangements involve tenure insecurity, the sale of customary land includes information asymmetry between customary sellers and urban land buyers. A market failure emerges and results in a city with too small extent and population. We formulate several tests to detect the existence of tenure risk and asymmetric information and apply them to georeferenced data on land prices in Bamako, Mali. The tests confirm the existence of tenure risk and information asymmetry in the primary land market where urban land is supplied for the first time by customary sellers. Tenure risks reduce land prices by about 50%. Information asymmetry is however not found to prevail in the secondary land market where non-statutory land is traded between urban residents. This is consistent with the absence of information sharing outside customary communities when land is first put into circulation and with better access to information on risks after plots have been subsequently transacted.