The Formation of Beliefs: Evidence from the Allocation of Land Titles to Squatters

29 Pages Posted: 14 Feb 2012  

Rafael Di Tella

Harvard Business School - Business, Government and the International Economy Unit; National Bureau of Economic Research (NBER)

Sebastian Galiani

University of Maryland - Department of Economics

Ernesto Schargrodsky

Universidad Torcuato Di Tella

Date Written: April 22, 2006

Abstract

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.

Keywords: beliefs, property rights, natural experiment, institutions

JEL Classification: P16, E62

Suggested Citation

Di Tella, Rafael and Galiani, Sebastian and Schargrodsky, Ernesto, The Formation of Beliefs: Evidence from the Allocation of Land Titles to Squatters (April 22, 2006). Available at SSRN: https://ssrn.com/abstract=2003926 or http://dx.doi.org/10.2139/ssrn.2003926

Rafael Di Tella

Harvard Business School - Business, Government and the International Economy Unit ( email )

Cambridge, MA
United States
617-495-5048 (Phone)
617-496-5985 (Fax)

HOME PAGE: http://www.people.hbs.edu/rditella/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Sebastian Galiani (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

Ernesto Schargrodsky

Universidad Torcuato Di Tella ( email )

Minones 2159
1428 Buenos Aires, 1428
Argentina
+54 11 4784 0080 (Phone)
+54 11 4783 3220 (Fax)

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