Collective Decisions in Asset Titling

Abstract

Recent literature on economic development and poverty has stressed the issue of property rights, informal institutions and their relationship with capital markets. This paper intends to model some aspects of economist Hernando De Soto's work on informality, particularly how does the establishment of a property system allows people to choose from a larger set of trading partners?, and why is the individual cost-benefit decision of getting a legal property title considered a network issue?. A game theory approach was followed to model this problem: payoffs are correlated with the distribution of total population between official and unofficial sectors, and issues of positive feedback and externalities arise. Conclusions include some policy analysis for the case of housing in Colombia.

Keywords: Social Choice, Formal Sector, Colombia

JEL Classification: D71