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Determinants of property rights institutions: survey of literature and new evidence

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  • Abdoul’ Mijiyawa

Abstract

Why do some countries have better institutions than others? More specifically, what accounts for variation in the quality of property rights institutions in different countries? In this paper, I empirically assess four different theories relating to the determinants of property rights institutions: (1) the economic approach, which maintains that property rights institutions are created when the benefits of their creation exceed their costs; (2) the cultural approach, which stipulates that institutional variation reflects the differences in the beliefs of political leaders about what institutions create benefits for society; (3) the historical approach, which contends that cross-country differences in property rights institutions are the by-product of historical accidents; and (4) the political approach, which defends the premise that institutions are voluntarily chosen by the individuals who control political power, and these individuals choose institutions with the objective to maximize their personal payoffs rather than the benefits of the society as a whole. In order to test the veracity of these theories, I undertake a cross-sectional analysis of 142 countries (including 116 developing and 26 developed countries) over the period 1970–2005. The results of this analysis provide several interesting insights. Firstly, they indicate that the political approach appears to be the most relevant explanation for cross-country variation in property rights institutions: not only is this approach the most statistically robust, it also provides the best fit with the property rights index. The results of non-nested hypothesis test à la Davidson and MacKinnon ( 1981 ) confirm this analysis. Secondly, regardless of econometric specification and country sample, democracy is positively and significantly linked to property rights institutions. Thirdly, the data also reveal that while legal origin does significantly affect property rights institutions in developing countries, it appears to have no effect in developed countries. Fourthly, my analysis demonstrates that, in contrast to the full sample case, an increase in GDP per capita does not significantly contribute to the improvement in the quality of property rights institutions in Africa. Copyright Springer-Verlag Berlin Heidelberg 2013

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  • Abdoul’ Mijiyawa, 2013. "Determinants of property rights institutions: survey of literature and new evidence," Economics of Governance, Springer, vol. 14(2), pages 127-183, May.
    • Handle: RePEc:spr:ecogov:v:14:y:2013:i:2:p:127-183
    DOI: 10.1007/s10101-013-0126-1
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    7. Christopher Hartwell, 2022. "Institutions and trade‐related inequality," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 3246-3264, July.
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    More about this item

    Keywords

    Institutions; Property rights; Democracy; Legal origin; Culture; Economic development; A12; P14; P16; O10; O57;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • P14 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Property Rights
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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