Security of Property Rights for Whom?

Abstract:     
Protecting the entitlements of some inherently requires preventing others from claiming and controlling those same resources. Yet much recent research regarding property rights and economic development treats the level of property rights security in a country as homogeneous. This one-dimensional conception of property rights ignores significant variation in the risk of expropriation faced by different groups in the same country. Using a new set of indicators that measures the property insecurity of ethno-cultural minorities, this article finds that, in many countries, members of marginalized groups face significantly higher property insecurity than foreign investors and domestic elites. Unsurprisingly, the allocation and enforcement of resource entitlements through legal institutions reflects the distribution of political power. The cross-national indices of institutional quality widely used in the research literature - initially designed to assess the property security of foreign investors - fail to consider marginalized minority groups. It has been widely argued that secure private property rights are a prerequisite for economic development. This article shows that it fundamentally matters whose property rights are secure. Based on the new bottom-up measure of property insecurity, this article finds that although secure property rights for elites and foreign investors may be positively related to long-run development, property rights for marginalized groups are not. Aggregate long-run growth occurs in the presence of significant property insecurity for marginalized minorities.

Number of Pages in PDF File: 40

Keywords: property rights, economic development, growth, risk of expropriation, property insecurity, minorities, institutions, indicators

JEL Classification: A10, A14, B25, H11, J15, J18, K, K1, K11, K12, K33, O1, O1, O11, O12, O13, O15, O17, O18, Q15

working papers series