The Role of Property Rights as an Institution: Implications for Development Policy

Mercatus Policy Series Policy Primer No. 2

25 Pages Posted: 2 Feb 2009 Last revised: 9 Mar 2009

Date Written: May 1, 2005

Abstract

There is a very real risk that reforms enacted in the name of property rights will fail if policy makers employ the rhetoric of property rights, but don't pay careful attention to what makes property regimes function in the real world. When they are secure and divisible, property rights unleash entrepreneurship and economic prosperity and form the basis for trade and markets. Divisibility means that individuals may trade sticks in their bundle of property rights with others -- they are allowed to negotiate and decide how they may or may not use property they hold. In many countries legislative, regulatory and, at times, customary barriers block the divisibility of rights or fail to enforce rights, creating insecurity for rights holders. Well-intentioned development programs often create similar constraints. Such decisions mute the incentive structure that exists when property rights are robust and contracts are respected. When such barriers exist, economic growth is sacrificed, and human flourishing is constrained.

Keywords: Institutions, Development Policy, Property Rights.

Suggested Citation

Boudreaux, Karol, The Role of Property Rights as an Institution: Implications for Development Policy (May 1, 2005). Mercatus Policy Series Policy Primer No. 2, Available at SSRN: https://ssrn.com/abstract=1336664 or http://dx.doi.org/10.2139/ssrn.1336664

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