The efficiency of land-use in a developing city: traditional vs modern tenure systems in Kampala, Uganda

March 7 2019

Land rights and tenure systems are an important factor behind poor housing and inefficient land-use in developing country cities. In Kampala, Uganda, four systems of land tenure coexist, allowing a detailed study of the effects of these on household and firm location decisions. Spatially disaggregated data across the city suggest that the presence of a traditional land tenure system (called mailo) skews land-use towards informal housing and away from productive activities. Using a structural model of the city we show that this due to mailo having a positive value for occupants of informal housing, attributable to mailo-specific amenity benefits and/ or rent caps. We use the model to investigate the effect of converting all mailo land in the city to leasehold. Despite direct loss of amenity experienced by mailo residents, aggregate city income may rise substantially because of more efficient land-use. Manufacturing firms move into formerly mailo areas and form new clusters of activity. This increases urban wages, particularly among the low skilled, and raises aggregate urban real incomes by 2% in the absence of localisation economies and as much as 6.7% in the presence of such economies of scale.

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Julia Bird is a Postdoctoral Research Economist at Oxford University. Her research focuses on understanding the location choices of individuals and firms within and across urban areas, and in particular, how these spatial patterns are affected by transport infrastructure.

Tony Venables is Professor of Economics at the University of Oxford where he also directs the Centre for the Analysis of Resource Rich Economies. He has published extensively in the areas of international trade and spatial economics, including work on trade and imperfect competition, economic integration, multinational firms, and economic geography.