A question of title: Property rights and asset values

This paper examines the impact of land title systems on property values. The predominant system in the U.S. and a few other countries, the recording system, awards title to claimants over current possessors, whereas the predominant system throughout most of the world, the registration system, awards title to the current possessor. The theory illustrates that the title system effect on asset value depends on property-specific factors like the risk of a claim and title system characteristics like transactions costs. A natural experiment in Cook County, Illinois, where both systems existed side-by-side from 1897 through 1996, allows a test of the theory. The evidence for commercial and industrial properties reveals that parcels tend to self-select into the two systems as expected with registration enhancing value once the self-selection effects are removed.