The Role of Land Property Rights in the War on Illicit Crops: Evidence from Colombia

Abstract

This paper examines the effect of the formalization of land property rights in the war against illicit crops, using the case of Colombia. We argue that as a consequence of the increase in state presence and visibility, municipalities with a higher level of formalization of their land property rights witnessed a greater reduction in the area allocated to illicit crops. We hypothesize that this is due to the possibility of obtaining more benefits in the newly installed institutional environment when land is formalized, and the increased cost of growing illicit crops on formal relative to informal land. We find that a one-standard-deviation increase in the formality index for smallholders is related to a reduction in the share of municipal area allocated to coca crops of 0.101 percentage points. That is, the formalization of one additional hectare of land with respect to small landholders in an average municipality in the year 2000 is associated with a decrease of approximately 1.4 hectares of land allocated to coca within that particular municipality, ceteris paribus. These results remain robust to a number of sensitivity analyses. Our findings contribute to empirical evidence on the positive effects of formal land property rights and effective policies in the war on drugs.