Are civil-law notaries rent-seeking monopolists or essential market intermediaries? Endogenous development of a property rights institution in Mexico.

Abstract

As the fourth contribution in the 'Land' section, this paper forms a research 'diptych' with the next paper by Levy. Whereas she focuses on the notarial institution in mid-nineteenth century Mexico, this contribution examines it in a contemporary context. The notary is one of the chief components of property rights protection in civil-law systems, performing various public functions such as writing deeds for real estate property. Yet notaries are considered an 'inefficient' institution by many, due to the perception of rent-seeking behavior enabled by their near-monopoly over validating property rights claims. This study examines notaries in Mexico to unpack the apparent contradiction in the role of notaries in economic development. I use a combination of interviews with notaries and clients, and data on notarial practice and bureaucratic outcomes across the country, to examine notaries' social function. The theoretical lens of endogenous development and institutional functionalism reveals an alternate explanation for their seemingly high-cost services, as well as their role in economic development. Mexican notaries have a dual social function: public representative and private service provider. They perform diverse and essential activities, which in other countries are performed by multiple actors such as real estate agents, escrow offices and title insurance companies. Thus, what is perceived as inefficiency by some can be interpreted as an efficient response to the context in which they operate, and their semi-privatized nature can overcome problems found in other bureaucratic arrangements.