Are Free Loans of Land Really Free? an Exploratory Analysis of Risk-coping Motives in Land Arrangements in the Northeast of Thailand
Abstract: This paper contributes to an emerging literature on the relationship between free exchange of land use rights and risk-coping motives in developing countries. We argue that in-depth empirical analysis of the nature of land arrangements is crucial to understand risk-coping motives in land tenure. Using mixed quantitative and qualitative data collected in Thailand, the paper proposes an innovative framework which looks at transfers of use rights in a continuum from pure market to free exchange. Land transfers are categorized along three dimensions: the nature of the relationship between the parties involved, the nature of the payment made, and how explicit the payment is in the contractual terms. The economic motivations in each of the consequent categories of land arrangement are then analyzed with a multinomial probit. Our main results suggest that while free loans of land are allegedly common practice in Thailand, only a small number of those transfers are really free. Most appear to be a `disguised form of rental contract' set by households who rely heavily on their risk-sharing network for risk-coping, and hold property rights vulnerable to family claims despite the presence of formal titles. Our preliminary results also confirm what the literature has previously shown: when confronted with local social norms and the economic rationales created by multimarket failures, a sound formal property rights system proves non-sufficient to establish de facto formal property rights.