transaction costs associated with administering credit to small producers in rural areas. In environments where these costs are high, the improved credit-worthiness brought about by possession of land title may therefore not be enough to facilitate access to formal credit by small farmers. Unless complementary measures to reduce transaction costs and ensure access to credit by this group are undertaken alongside with individualized property rights through titling, the benefits from titling programs may accrue only to medium and large landowners.

The importance of the credit supply effect associated with provision of land title is supported by evidence from Feder et al.'s (1988) study in Thailand, where farmers' opinions and econometric evidence point towards improved credit supply as the main benefit from titling. Land ownership titles induced higher investment in farming capital (attached investments and other capital),<sup>14</sup> titled land had signiificantly higher market values and higher productivity per unit. In three of the four provinces covered, households' credit supply had been significantly enhanced by the availability of title. By contrast, and in line with the above, title was found to have little impact on either investment or farm income where formal credit markets were not available (Atwood 1990, Carter and Wiebe, 1994; Migot Adholla et al. 1994).15 Additional evidence from a study based on panel date from Paraguay indicate that titling had a positive income or productivity enhancing effect through credit market benefits for at least some groups of farmers. Due to a strong impact of formal title on both credit supply and investment demand, the benefits from title are relatively large (about 10% of farm income), and significantly higher than the cost of titling,. However, the impact of awarding titles was strongly size-differentiated. Estimates indicate that producers below 20 hectares remained rationed out of the credit market and therefore did not benefit at all from the credit-supply effect of title (Carter and Olinto, 1996).

This differential impact suggests that, in environments where other markets (such as credit markets) entail distortions which put smaller and poorer farmers at a disadvantage, individual property rights on equity, and -in the medium to longer term- on the direction and nature of land transfers between different size classes of producers, could imply greater inequity. Whether, in the presence of heterogeneity in endowments, small producers will benefit from such policies depends critically on the ability to reduce, together with titling, transaction costs and policy induced distortions that limit access to credit markets.

> **4** Problems of endogeneity and self-selection are circumvented by drawing samples from squatter villages in areas nominally under public ownership (where titles could not be awarded) and private areas where all residents already had obtained titles.

> **"** Pender and Kerr (1996) show that for India land ownership has little impact on credit supply, a fact that is attributed to severe non-price rationing. Nonetheless, land values for titled land are on average about 15% higher than for untitled land, suggesting that possession of formal title reduces the probability of land loss for potential buyers.

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