The Formation of Beliefs: Evidence from the Allocation of Land Titles to Squatters
Rafael Di Tella
Harvard Business School - Business, Government and the International Economy Unit; National Bureau of Economic Research (NBER)
University of Maryland
Universidad Torcuato Di Tella
April 22, 2006
We study the formation of beliefs in a squatter settlement in the outskirts of Buenos Aires exploiting a natural experiment that induced an allocation of property rights that is exogenous to the characteristics of the squatters. There are significant differences in the beliefs that squatters with and without land titles declare to hold. Lucky squatters who end up with legal titles report beliefs closer to those that favor the workings of a free market. Examples include materialist and individualist beliefs (such as the belief that money is important for happiness or the belief that one can be successful without the support of a large group). The effects appear large. The value of a (generated) index of “market” beliefs is 20% higher for titled squatters than for untitled squatters, in spite of leading otherwise similar lives. Moreover, the effect is sufficiently large so as to make the beliefs of the squatters with legal titles broadly comparable to those of the general Buenos Aires population, in spite of the large differences in the lives they lead.
Number of Pages in PDF File: 29
Keywords: beliefs, property rights, natural experiment, institutions
JEL Classification: P16, E62
Date posted: February 14, 2012
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