Costs and Benefits of Land Ownership: The Case of Russian Firms

31 Pages Posted: 5 Nov 2015 Last revised: 11 Nov 2015

See all articles by Paul Castañeda Dower

Paul Castañeda Dower

University of Wisconsin-Madison

Egor Malkov

University of Minnesota - Twin Cities - Department of Economics

Leonid Polishchuk

National Research University Higher School of Economics

William Pyle

Middlebury College - Department of Economics

Date Written: November 5, 2015

Abstract

Private ownership confers numerous benefits, including stronger performance incentives, better use of privately owned assets, and improved access to finance. We argue that privately owned land could be both an asset and a liability, and overall net benefits of land ownership are contingent on the quality of surrounding institutions. We present a simple model and empirical evidence based on the Business Environment and Enterprise Performance Survey (BEEPS) in Russia, which clearly demonstrates such conditionality in the case of land ownership by Russian industrial firms. Consistently with earlier literature, land ownership facilitates firms’ access to finance (the “de Soto effect”), but at the same time entails additional risks and obstacles to doing business. When the quality of property rights protection and other key institutions is poor, land ownership could have an adverse effect on firms’ performance.

Keywords: de Soto effect, land ownership, property rights, privatization, institutional complementarity

JEL Classification: D23; O17; Q15; R14; R52

Suggested Citation

Castañeda Dower, Paul and Malkov, Egor and Polishchuk, Leonid and Pyle, William, Costs and Benefits of Land Ownership: The Case of Russian Firms (November 5, 2015). Higher School of Economics Research Paper No. WP BRP 107/EC/2015, Available at SSRN: https://ssrn.com/abstract=2686562 or http://dx.doi.org/10.2139/ssrn.2686562

Paul Castañeda Dower

University of Wisconsin-Madison ( email )

Madison
Madison, WI 53705

Egor Malkov

University of Minnesota - Twin Cities - Department of Economics ( email )

1925 Fourth Street South
Minneapolis, MN 55455
United States

Leonid Polishchuk (Contact Author)

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

William Pyle

Middlebury College - Department of Economics ( email )

Munroe Hall
Middlebury, VT 05753
United States
(802) 443-3240 (Phone)

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