Property Rights & Economic Development

Implicit or explicit property rights can be created by regulating the environment, either through prescriptive command and control approaches e. It has been proposed by Ronald Coase that clearly defining and assigning property rights would resolve environmental problems by internalizing externalities and relying on incentives of private owners to conserve resources for the future. At common law nuisance and tort law allows adjacent property holders to seek compensation when individual actions diminish the air and water quality for adjacent landowners. Critics of this view argue that this assumes that it is possible to internalize all environmental benefits, that owners will have perfect information, that scale economies are manageable, transaction costs are bearable, and that legal frameworks operate efficiently.

In researchers [12] produced an annotated bibliography on the property rights literature concerned with two principal outcomes: They found that better protection of property rights can affect several development outcomes, including better management of natural resources. Despite the overwhelming evidence on the economic relevance of property rights however, only recently economists have begun to study their determinants by looking at the trade-off between the dispersed coercive power in a state of anarchy and the predation by a central authority.

To illustrate, incomplete property rights allow agents with valuation lower than that of the original owners of economic value to inefficiently expropriate them distorting in this way their investment and effort exertion decisions. When instead, the state is entrusted the power to protect property, it might directly expropriate private parties if not sufficiently constrained by an efficient political process. Carmine Guerriero blends these two different strands of literature by linking property rights protection, transaction costs, and preference heterogeneity. When the protection of property is weak instead, low-valuation potential buyers inefficiently expropriate original owners.

Navigation menu

Hence, a rise in the heterogeneity of the potential buyers' valuations makes inefficient expropriation by low-valuation potential buyers be more important from a social welfare point of view than inefficient exclusion from trade and so induces stronger property rights. Crucially, this prediction survives even after considering production and investment activities and it is consistent with a novel dataset on the rules on the acquisition of ownership through adverse possession and on the use of government takings to transfer real property from a private party to another private party prevailing in jurisdictions.

To capture preference diversity, the author uses the contemporary genetic diversity, which is a primitive metric of the genealogical distance between populations with a common ancestor and so of the differences in characteristics transmitted across generations, such as preferences. Evidence from several different identification strategies suggests that this relationship is indeed causal. The property rights approach to the theory of the firm based on the incomplete contracting paradigm was developed by Sanford Grossman , Oliver Hart , and John Moore.

There will be renegotiations in the future, so parties have insufficient investment incentives since they will only get a fraction of the investment's return in future negotiations ; i. Hence, property rights matter, because they determine who has control over future decisions if no agreement will be reached. In other words, property rights determine the parties' future bargaining positions while their bargaining powers, i.

• Monday Attitude Adjustment Stories (MAAS);
• This item appears in the following Collection(s).
• The Relationship between Property Rights and Economic Growth: an Analysis of OECD and EU Countries.

Yet, it has also been applied in various other frameworks such as public good provision and privatization. For instance, some authors have studied different bargaining solutions, [22] [23] while other authors have studied the role of asymmetric information.

Classical economists such as Adam Smith and Karl Marx generally recognize the importance of property rights in the process of economic development, and modern mainstream economics agree with such a recognition. The lack of protection for property rights provided little incentive for landowners and merchants to invest in land, physical or human capital, or technology. After the English Civil War of and the Glorious Revolution of , shifts of political power away from the Stuart monarchs led to the strengthening of property rights of both land and capital owners.

Consequently, rapid economic development took place, setting the stage for Industrial Revolution. Property rights are also believed to lower transaction costs by providing an efficient resolution for conflicts over scarce resources. Property rights might be closely related to the evolution of political order, due to their protections of an individual's claims on economic rents.

Particularly, the legal and political systems that protect elites' claims on rent revenues form the basis of the so-called "limited access order", in which non-elites are denied access to political power and economic privileges. Universal property rights, along with impersonal economic and political competition, downplay the role of rent-seeking and instead favor innovations and productive activities in a modern economy.

From Wikipedia, the free encyclopedia. Part of a series on Economics Index Outline Category. History of economics Schools of economics Mainstream economics Heterodox economics Economic methodology Economic theory Political economy Microeconomics Macroeconomics International economics Applied economics Mathematical economics Econometrics. Economic systems Economic growth Market National accounting Experimental economics Computational economics Game theory Operations research. Alienation property law Bundle of rights Common ownership Commons Economic system Intellectual property Land tenure Land titling Law and economics Means of production Natural and legal rights Open-access Personal property Public property Private property Property income Right to property Social ownership State ownership Taxation as theft.

A property right is a socially enforced right to select uses of an economic good. Concise Encyclopedia of Economics 2nd ed. Library of Economics and Liberty. Archived from the original on Economic behavior and institutions. A Bundle of Rights? Prologue to the Symposium. Explicit use of et al.

Journal of Law and Economics. Property Rights and Economic Theory: A Survey of Recent Literature. Journal of Economic Literature , 10 4 , — Do Institutions Cause Growth?. Journal of Economic Growth , 3 9 , — Democracy, Property Rights and Economic Growth. Journal of Development Studies , 32 2 , — Journal of Development Economics , 48, — Spurious Regressions in Econometrics. Journal Of Econometrics , 2, — Journal of Development Studies , 1— Law, Legislation and Liberty. Routledge and Kegan Paul. A Unified Empirical Investigation. World Development , 46, 66— International Property Rights Index Report Tenure Insecurity and Investment in Rural China.

American Economic Review , 92 5 , — Property Rights and Finance. Oxford Bulletin Of Economics and Statistics , 52, — Journal of Macroeconomics , 15 4 , — Oxford Economic Papers , 55, 5— Polarization, Politics And Property Rights: Links Between Inequality And Growth. Public Choice , , — Property Rights, Capital Formation, and Development.

Journal of Institutional Economics , 4 33 , — The Journal of Economic History , 55 1 , 58— Institutions and Economic Performance: Cross-Country Tests using Alternative Measures. Economics and Politics , 7, — The economic consequences of legal origins. Journal of Economic Literature , 4 2 , — Property Rights, Democracy and Economic Growth. Political Research Quarterly , 49 1 , 5— American Economic Review , 99, — Contracting for Property Rights.

The Social Bases of Politics. Economic Foundation of Strategy , Sage Publication. Modern Economy , 2, — Working Paper , 1— International Evidence From Micro Data.

The spirit of laws. With the exception of the chapter on commerce, which is not in the Carrithers edition, all page number citations are from Montesquieu ed. The chapter on commerce is taken from the complete version of Spirit at http: Evidence From Cointegration Tests. Applied Economics , 37 17 , — Economic Modelling , 22, — Journal of The Asia Pacific Economy , 10 1 , 96— An Empirical Investigation of Fiji-U. Contemporary Economic Policy , 24 2 , — The New Institutionalism in Economics and Sociology.

Files in this item

Journal of Economic History , 49 4 , — Institutions, Institutional Change and Economic Performance. The Journal of Economic Perspectives , 5 1 , 97— Legal Environment, Finance Channels and Investment: The East African Example. The Journal of Development Studies , 46 4 , — Contemporary Economic Policy , 15, 51— The Economic Journal , , — Journal of Applied Econometrics , 16, —