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This paper analyzes social choice with respect to the demarcation of land boundaries, distinguishing between physical and legal demarcation. In contrast with the influential “land administration” literature and the World Bank’s policy guidelines, the analysis supports voluntary—instead of mandatory—demarcation as well as nonintegrated services for land administration. Consistent with these theoretical arguments, the paper empirically verifies that demarcation conflicts play a lesser role in title-, land- and property-related litigation, which seems to increase in all these areas after physical demarcation is made mandatory. Relying on World Bank data, it also observes that linking and merging cadastres and land registries does not correlate with lower transaction costs.
6. Concluding remarks
Relying on a conceptual distinction between physical and legal demarcation and a simple model, this paper illuminates two main deficits in land administration policies: lack of adaptation to individual circumstances, and little concern for legal demarcation. The model suggests that, in the presence of fixed costs and the absence of externalities, it is individually optimal to subject low-value land to less precise demarcation, and it is socially optimal to allow voluntary demarcation. On the contrary, mandatory demarcation may lead to undertitling and overdemarcation. In particular, it may lead owners to inefficiently anticipate boundary-related litigation. Moreover, it is essential to distinguish between mere physical demarcation, in which some parties identify land parcels and measure and draw their boundaries, and legal demarcation, which, by gathering the consent of neighbors, more perfectly defines property rights in the physical dimension.
Empirical analyses provide some support for this critique of common practices in land administration, as they indicate that (1) land demarcation plays a relatively minor role in litigation, (2) mandatory demarcation is associated with increases in demarcation-related litigation which are unjustified by real-estate development, and (3) merging cadastres and land registries is not associated with better performance. These descriptive indications call for further research, in particular with respect to the effect of mandatory demarcation on litigation.