Development Derailed: Uncertain Property Rights and Coordinated Investment
80 Pages Posted: 25 Jun 2018 Last revised: 3 Sep 2020
Date Written: August 18, 2020
We empirically quantify the sensitivity of investments to uncertain property rights by drawing upon the Northern Pacific’s massive land grant and the ensuing political and legal battle that generated significant uncertainty to title. To overcome the empirical challenge that property rights and investment coevolve, our analysis exploits the spatially exogenous extent of the grant to identify causal effects. Focusing on irrigation due to its high asset specificity and centrality to development in the arid west, we find that the uncertainty delayed (4.2 years) and deterred (28 percent) irrigation investment in Montana, lowering the state’s total economic activity by 6 percent.
Keywords: Property Law, Property Rights, Railroad Land Grants, Political Economy, Economic Development,
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