You're the Economist

Small Group - Directions for Analyzing Ricardo's Survey Data

Appoint someone to lead the discussion, a spokesperson to report to the class, and a recorder to fill in the answers to the group discussion questions below. After reading Ricardo's journal entries (handout 2), study the charts compiled from the survey data he collected in 1992 and 1993 (handout 3).

All the information Ricardo gathered came from the settlers' memories. However, the researchers consider this a reliable source since the farmers have no reason to lie to the researcher. Also, as Ricardo notes in his journal, this information is very important to farmers and they are likely to remember accurately.

1. Ricardo Tarifa's questioning of landholders in Altamira revealed that they had a good understanding of the market for land. For example, they knew that the value of their land increased significantly if they held a clear title. Many of them had squatted on frontier land before and had sold their holdings to new settlers as population grew. They knew that some incoming settlers would only buy land with title, and that land with clear title brought higher prices than land without. They also knew that land prices were related to distance from towns and cities. The farther a piece of land was from an urban center, the lower the price.
   
   1. To get title, the landholders had to travel to the urban center and negotiate the bureaucratic requirements of the land agency. Based on Ricardo's journal and the description of Altamira, what is the opportunity cost to a poor farmer of taking the steps to get title to his land?
      
   2. What is the benefit?
   3. In economic terms, farmers will pursue title when the benefits of doing so outweigh the costs. Translate that economic language to apply to this situation. For the Altamira landholders, when will the benefits outweigh the costs?
      
2. Read and discuss the charts. Pay attention to similarities and differences in the data for title holders and the data for landholders without title.
   A. Individually, list 3 things you find interesting about the data or questions the data raise in your mind. Share your thoughts with your group.
   
3. Recent research suggests that investment in land is one of the ways subsistence farmers can begin to improve their wealth and standard of living. Consider the following definitions:

   Investment: expenditures (of time, money, other resources, etc.) on capital in order to increase future production.
   Physical capital: machines, buildings, technology, and tools used in the production of goods and services.
   Human capital: the store of knowledge, skills, and abilities workers bring to the production of goods and services. Education, training, and experience improve human capital.

   Apply the definitions of capital to the Altamira data:

   1. Based on the overheads you've seen and the handouts you've read, describe the human capital of the Altamira settlers.
      
      
   2. What are the Altamira landholders doing that improves their human capital? Why aren't they making other kinds of investments in their human capital?
      
      
   3. Other than land, what physical capital do the settlers have?
      
      
   4. Which of the following activities (from the columns on the survey data chart) are investments in physical capital? (Reminder: Ask yourself whether the activity in question is intended to increase the productivity of the land, making it more valuable in the future.)
      

   Activity	Is this an investment in land? Yes/No	Explanation
   Clearing Land
   Planting Permanent Crops
   Buying chickens
   Buying cattle
   Buying pigs
   Buying horses
   Adding pasture
   Fencing

   
   
4. The institution of property rights is the specific focus of this study. In the Altamira survey, "Yes" means that the settler has a clear title and can expect his/her property rights to be protected. "No" means either that the settler has no title at all, or has only some form of claim to ownership, such as a receipt, an unregistered title, or a provisional title. Those without clear title had no certainty that their ownership rights would be enforced.
   1. Compare the level of each of the investment activities for landholders with title and landholders without. Look for patterns of relationship between title and investment. Describe.
      
      
   2. Conduct a simple mathematical test of the data. Calculate the average investment for title holders and compare it to the average investment for those without title. Compare the investment in each of the 4 categories of investment measured in the survey.
      • Start by finding the average meters fenced by title-holding farmers. Add the number of meters for all the titled farmers and divide the total by the number of titled farmers. Repeat the process for the farmers with no title. Which average is greater?
      • Repeat this process for each of the other 3 investment categories.
      • Compare the averages for title-holders and non-title-holders.

      (Note: Look back at the chart you completed in question #3. You should have identified 4 investment activities. Ask your teacher to check your answers to question 3 before you transfer them to this chart and begin calculating the averages.)

      Average investment in Fencing (meters)		Average investment in ________		Average investment in ________		Average investment in ________
      Title	No Title	Title	No Title	Title	No Title	Title	No Title

      
      
   3. Based on your preliminary analysis, what is the relationship between title and investment? (Note well: Finding averages is only the simplest indicator of a pattern to this data. Professors Alston, Libecap, and Mueller ran complex statistical analyses of the data. Your task is simply to find and compare the averages in order to determine whether a pattern exists and might merit further analysis.)
      
      
   4. Ricardo Tarifa surveyed other sites similar to Altamira and the survey data revealed the same patterns. Knowing your interest in poverty, your professor asks you to explain the significance of this study. What does it suggest about the role property rights might play in reducing poverty in developing countries?