A Question of Title: Property Rights and Asset Values

This paper examines the impact of land title systems on property values. The predominant system in the U.S., the recording system, awards title to claimants over current possessors, whereas the Torrens registration system awards title to the current owner. In theory, the registration system maximizes property value, all else equal, but in practice, the systems differ depending on the risk of a claim and administrative costs. A natural experiment in Cook County, Illinois, where both systems have existed since 1897, allows a test of the theory. The results, based on commercial and industrial properties, reveal that parcels tend to self-select into the two systems based on the predictions of the theory.