Extra-legal land market dynamics on a Guatemalan agricultural frontier: Implications for neoliberal land policies

Neoliberal land policies such as land administration seek to improve property rights and the efficiency of land markets to boost rural economic production., Quantitative studies of pre-existing land markets can help planners to tailor these policies to local conditions. In this article we examine an extra-legal land market currently being modernized by a World Bank-sponsored land administration effort. Specifically, we use a hedonic-type revealed preference model and household survey data to estimate the factors affecting extra-legal land prices along an agricultural frontier in Peten, Guatemala. Our model indicates that land value is significantly affected by land attributes including location, tenure status, presence of water, distance to roads, and distance to landowners' homes, and that land prices in the northwestern Peten are estimated to have risen on average 26.5% per year between 1977 and 2000. We contend that this rate of increase provides a strong incentive for colonists to speculate in land rather than invest in state sanctioned property rights. We conclude that if frontier development programs, such as land administration, are to become attractive to settlers in Peten and elsewhere, they must compete favorably with economic incentives associated with land speculation, or alternatively, target landowners who are not interested in playing the land market. (c) 2005 Elsevier Ltd. All rights reserved.