Development Derailed: Policy Uncertainty and Coordinated Investment
38 Pages Posted: 25 Jun 2018 Last revised: 12 Aug 2021
Date Written: June 30, 2021
Abstract
We quantify the sensitivity of investments to policy uncertainty by drawing upon the Northern Pacific’s massive land grant and the ensuing political battle that generated significant uncertainty to title from 1879 to 1894. Focusing on irrigation due to its high asset specificity, our analysis exploits the spatially exogenous extent of the grant to identify causal effects on investment, inclusive of spillovers to secure land because coordinated investment is generally necessary to capture the scale economies of irrigation. We find that the uncertainty significantly deterred and delayed irrigation investment in Montana, lowering the state’s economic activity by up to five percent.
Keywords: Property Law, Property Rights, Railroad Land Grants, Political Economy, Economic Development,
JEL Classification: P48, D23, K11, N51, O13, Q15, H81
Suggested Citation: Suggested Citation