Property Rights on Unused Assets and Investment Incentives: Evidence from Brazil

It is usually stated that property rights security on assets positively affects investment incentives since it guarantees the ability to get the future benefits from investment. Yet, the empirical evidence on this relationship is ambiguous. From a theoretical point of view, this is not surprising since property rights security on asset may even entail a negative effect on investment incentives as long as property right are endogenous to investment (Besley, 1995) or investors are characterized by time-inconsistent preferences (Vertova, 2020). Instead, from a theoretical point of view, a clear-cut negative relationship exists between property rigths security on unused assets (the expected ability to invest on a unsued asset) and investment incentives. In this paper I test this theoretical prediction using a difference-in-difference matching method on Brazilian municipal data. I find that land occupations by Landless Workers’Movement (as a proxy for property rights insecurity on unused assets) positively affect the degree of land use (as a proxy for investment) In Brazilian municipalities