Land and legibility: Evidence from an urban land titling RCT in Congo

Low participation in the formal state sector is an impediment to good governance and economic development in many countries in Africa and elsewhere in the developing world. Governments struggle to raise taxes and deliver public goods to informal economic actors about whom knowledge is scarce. Among citizens, the lack of formal status — including property titles recognized by the state — may undermine the security of land ownership and preclude access to government services. Why might individuals resist formalization? Perhaps the clearest reason is a fear of greater tax liability upon entering the government database. Yet, even in settings where the link between formalization and tax liability is tenuous, rates of formal participation remain low. We study these issues in the context of a randomized land-titling campaign in Kananga, D.R. Congo, that offers randomly selected participants lower prices and lower transaction costs of acquiring a formal property title. The study also randomly varies the price of subsidized titles, allowing for the estimation of the elasticity of demand of formal titles with respect to price. We examine the effects of land formalization on tax compliance, state legibility in other domains, informal insurance networks, contributions to local public goods provision, and social status in the community.