The value of property rights and environmental policy in Brazil: Evidence from a new database on land prices

Lack of property rights is associated with lower investment, development, and welfare. In the Brazilian Amazon, insecure property rights have historically led to civil conflicts and deforestation, which would be expected to provide incentives for landowners to seek formal title. In this paper, we construct a novel database of land prices in Brazil to measure the market value of formal title to land and compliance with environmental regulation. Using online advertisements of land sale offers scraped from a widely used seller's platform, we first estimate a hedonic model that regresses the last offer price on property attributes such as farm-level agricultural production, land characteristics, structure amenities, and capital equipment included in the offer, as well as spatial and temporal fixed effects. We use this hedonic model to examine how property rights and environmental compliance capitalize into land prices across the Amazon and Cerrado biomes. Our main results imply low net benefits from property rights and low net benefits from compliance with the central Brazilian regulation that aims to maintain forest cover, the Forest Code. Finally, we estimate a duration model that follows the sequence of weekly offers for a specific property until it sells. Our findings show that parcels compliant with the Forest Code sell 46 % faster in the Amazon, while entitled properties in the Cerrado sell 9 % faster, unless they are compliant with the Forest Code, which requires a substantial portion of the property to be under native vegetation cover.