The Virtuous Cycle of Property

Abstract

We show that formalizing private property rights has a positive effect on the propensity to respect the property of others, a social preference with important implications for growth and economic development. Our identification strategy is based on a unique feature of a recent large-scale land-tenure reform in West Africa, which was the first of its kind to be implemented as a randomized control trial. To recover the effect of the reform on subjects' willingness to respect others' property, we used a lab-in-the-field experiment in which subjects played a modified dictator game designed to elicit their willingness to appropriate others' endowment. Results show that the formalization of private property rights reduced an individual's willingness to take from others. We used additional experimental measures and post-experimental survey data to rule out alternative explanations for the observed behavior that do not imply a change in preferences. These findings suggest that the structure and design of property rights institutions play a key role in shaping prosocial preferences.

Keywords: respect for property, anti-taking preferences, property reform, prosocial preferences

JEL Classification: D02; D04; K11