Property Rights, Growth, and Conflict

Abstract

Whose property rights are secure and insecure matters fundamentally for the political and economic implications of expropriation risk. Using a new set of indicators that measure the property insecurity of ethno-cultural minority groups, this article demonstrates that property insecurity of ethno-cultural minorities does not reduce long-run growth; that the severity of property insecurity for the worst-off group in a country is strongly related to the onset of armed conflict; and, controlling for civil war, property insecurity for ethno-cultural minorities is actually associated with higher growth rates. Economic growth can occur when the property rights of elites are secure but marginalized minorities face high a risk of expropriation, as land may be reallocated into the hands of investors with skills and access to capital. However, the potentially growth enhancing effect of forced displacement and resettlement is reduced because the property insecurity of minorities also increases the likelihood of armed conflict.

Keywords: property insecurity, conflict, long-run growth

JEL Classification: F00