Making and Breaking Property Rights: Political Foundations of Institutional Inefficiency

Abstract: Differences in property rights are often identified as being among the most robust variables in terms of explaining cross-national differences in economic growth and development. If secure and universally enforced property rights contribute to produce collectively beneficial economic outcomes, an important question becomes why there is so much variation in the institutions and rules that regulate property rights. This paper analyses why governments in some countries establish and enforce property rights that are good for growth while governments in other countries do not. The argument emphasises that the incentive to enforce and protect property rights is shaped by the type of political institutions in the political system. The role of coalition institutions in particular is emphasised as important, whereas power sharing institutions are hypothesized to be inconsequential for property rights. Based on a panel data set and various estimation techniques, empirical analyses are conducted that support the theoretical propositions.