Informal land markets and ethnic kinship in West African cities

We present an urban land use model with land tenure insecurity and information asymmetry regarding risks of contested land ownership, a very common issue in West African cities. A market failure emerges as sellers do not internalize the impact of their market participation decision on the average quality of traded plots, which in turn affects other sellers and buyers’ decisions. The equilibrium is suboptimal and has too many transactions of insecure plots and too few transactions of secure plots. This market failure can be addressed when agents trade along trusted kinship lines that discourage undisclosed sales of insecure plots. Such kinship matching is an important feature of West African societies, including on the market for informal land, as illustrated by a unique survey administered in Bamako, Mali. In the model, the extent to which the market failure is addressed increases with the intensity of kinship ties. When sellers also have the possibility of registering their property right in a cadastre, this not only further attenuates information asymmetry but also helps reduce risk. We find complementarity between kinship matching and registration: As transactions along trusted kinship lines tend to involve plots that are more secure on average, kinship matching makes registration better targeted at insecure plots traded outside kinship ties. In this context, a partial registration fee subsidy can bring the economy to the social optimum.11We are grateful to the editor and two anonymous referees for comments that helped us substantively improve the paper as well as to Amadou Cissé for the many discussions about social structures in West Africa that initially motivated this paper, to Demba Karagnara who coordinated field surveys in Bamako in 2012 and 2022, and to Pierre M. Picard, Jan Brueckner and Tony Yezer for suggestions and technical comments on the model. We are also grateful to Eliana la Ferrara and Karen Macours for useful insights on kinship and land markets in developing countries, as well as to Thierry Verdier, Miren Lafourcade and the participants to the Labor and Public Economics Seminar at the Paris School of Economics, to the International Conference of Development Economics and to the Annual Conference of the Centre for the Study of African Economies for various suggestions. We gratefully acknowledge the funding of the World Bank and of the Paris School of Economics Mobility Grant, a public grant overseen by the French National Research Agency (ANR-18-CE22-0013-01), the Labex OSE and the Labor and Public Economics Group at the Paris School of Economics .