Economic growth, financial crisis, and property rights: observer bias in perception-based measures

Recent years have seen an increasing number of empirical papers using subjective indicators in cross-country quantitative analyses of growth. We evaluate potential observer biases in the three most commonly employed subjective measures of property rights -- taken from the Heritage Foundation, Fraser Institute, and World Economic Forum. Drawing on cross-national data for 156 countries during the years 2000 -- 2010, we use Granger causality tests to assess whether exposure to recent information on economic performance introduces bias to coding of property rights scores. Further, we evaluate whether the Great Recession led observers to change property rights scores in advanced nations. We find consistent evidence that observers who provide subjective coding of property rights scores rated nations more positively when their economic performance was positive, and more negatively during the recent global financial crisis. Taken together, our findings suggest that coding of commonly employed property rights measures are subject to substantial observer bias.