Groundless Claims: Property Rights When Land Ceases to Exist

The property rights literature assumes that land continues to exist; climate change increasingly violates this assumption. This paper extends the Besley (1995) framework to settings where environmental destruction permanently eliminates the asset, replacing the standard investment and credit channels with three displacement-specific mechanisms: compensation receipt, adaptation investment, and post-displacement reallocation. Calibrated to Kenya’s Rift Valley, where rising lakes have submerged over 100 km² since 2005, the model implies that formally titled households recover substantially more welfare than informal occupants, with compensation accounting for the majority of the gap, and that displacement amplifies pre-existing gender inequality. Companion empirical project: Property Rights, Climate Displacement, and Household Welfare.