Land title, tenure security, investment and farm output: evidence from Guatemala

Having a title to land can be associated with increased farm output for two distinct reasons. On the one hand, access to credit may require the use of land, to which there is secure title, as collateral. The classical channel through which title affects output, however, is by increasing the landholders’ tenure security and, thus, the incentive to make investments tied to the land, whether credit financed or not. The article uses household level data from Guatemala that control for the credit access channel and isolate the effect that titles are found to have higher output and yield. This can be explained as the result of greater willingness to invest family labor in the present so as to generate higher future output due to greater tenure security. Using ordered probit analysis, I find that having title substantially increases the probability that households perform quality labor tasks which are associated with higher output levels.