Insecure property rights are a major cause of land-related conflict in Brazil and a contributory factor to deforestation in the Amazon. That is the central finding of research by Thiemo Fetzer and Samuel Marden, published in the May 2017 issue of the Economic Journal. Their study highlights the importance of establishing secure property rights over land in preventing civil conflict – and more generally, the role of law in limiting the set of assets for which the ownership can be contested.
The researchers note a prevailing view that natural resource abundance paired with weak institutions breeds civil conflict. Furthermore, weak institutions may foster the unchecked exploitation and erosion of natural resources. Yet there is a limited understanding of what type of institutional change is required to reduce civil conflict and unsustainable exploitation of natural resources.
Institutions can affect conflict by directly and indirectly shaping the underlying incentives. Economists have two main concepts for studying why individuals may engage in conflict:
• The first is opportunity cost: an activity, such as conflict (or any other crime), must have a payoff that is at least as high as the payoff from a legal activity (for example, wage employment).
• The second is slightly more abstract: there must be a valuable asset that is ''contestable'' – the ownership of which can be contested.
Most previous empirical work in the economics of conflict has focused on the important role played by the value of the opportunity cost and the institutions and policies that ameliorate these effects.
The new study considers the empirical and economic relevance of the second channel in the context of the Brazilian Amazon, where most of the land does not have well-defined property rights.
In fact, the Brazilian constitution encourages contest over land that is not in some form of socially ''productive use''. This implies that land that may be owned but not productively used by some party faces a constant threat of land invasions by squatters, who can convert the land to ''productive use'' and appeal to the government for title on grounds of the constitution.
Brazil is not unique in having constitutional provisions that encourage squatting and contest over property rights. The origins of this lie in the colonial past, which resulted in very unequal distribution of land ownership, which led to the adoption of policies and institutions that favour redistribution and land reform.
As such, Brazil is among the many Latin American countries that experience significant land-related civil conflict. Between 1997 and 2010, Brazil has experienced at least 280 murders, and many more lesser events (see Figure 1).
The researchers show that insecurity of property rights over land in the Brazilian Amazon is a major driver behind land-related civil conflict and a contributing factor to deforestation. This implies that the assignment of secure property rights can dramatically reduce civil conflict, even in the absence of changes in enforcement. Indeed, at the local level, it cannot be ruled out that substantively all violent land-related conflict is a consequence of Brazil''s failure to securely assign property rights over land.
The researchers arrive at these findings by exploring a natural experiment. Between 1997 to 2010, a lot of land in the Amazon was put under some form of ecological or indigenous protection (see Figure 2).
Land that is under some form of protection status, with the stroke of a pen, automatically fulfils the constitutional ''productive use'' requirement by virtue of being protected. This means that squatters have no more incentives to contest land in the protected areas by invading it, as they can no longer appeal to the government for title on grounds of having converted the land to ''productive use''.
Consequently, an increase in the municipal share of land under protection reduces the share of land in that municipality that is contestable. The causal chain for the argument is simple: the more land there is in a municipality that is protected, the less land there is available to fight over, which should result in less land-related conflict. The study shows that this is indeed the case.
The results indicate that weak property rights, and the resulting contestability of land title, is a primary cause of conflict. Indeed, it seems likely that at the municipal level, substantively all land-related violence is due to insecure titling. But the results also indicate that securing property rights in one location in part reduces land conflict by diverting it elsewhere.
Naturally, there are alternative explanations that could explain why land-related conflict decreases in municipalities that see a lot of land converted into protected areas. In particular, it could be that protection leads to more enforcement, that is, more park rangers or police officers checking on illegal activity, which itself could reduce violence.
But the researchers show that there is no detectable relationship with non-land-related crime (measured by general homicides), economic activity, environmental enforcement or local government expenditure. This means that the changes in land conflict do not appear to have been a by-product of other changes that might have accompanied the expansion of protected areas.
Deforestation, and particularly permanent deforestation and agricultural conversion, is a key input into land conflict as land clearing is necessary to signal productive use. This threatens the Amazon as the last remaining ecosystems that have not been subjected to anthropogenic changes.
Using high-resolution land cover data, the study verifies that protection is associated with a decrease in deforestation. But not all types of deforestation are affected equally. While permanent deforestation of the type necessary for establishing a title decreases substantially, short-run deforestation of the kind associated with illegal logging and temporary pasture actually increases.
The overall net effect suggests a reduction in deforestation, which is in line with previous studies that have found the bulk of deforestation being due to agricultural conversion. These results indicate that protection may have been successful in reducing deforestation, despite weak enforcement, by removing a path to title.
''Take What You Can: Property Rights, Contestability and Conflict'' by Thiemo Fetzer and Samuel Marden is published in the May 2017 issue of the Economic Journal. Thiemo Fetzer is an assistant professor in the Department of Economics at the University of Warwick and a Research Associate at the Centre for Competitive Advantage in the Global Economy (CAGE). Samuel Marden is an assistant professor in the Department of Economics at the University of Sussex.