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Property Rights Reform and Development: A Critique of the Cross-National Regression Literature

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  • Lawrence King
  • Osvaldo Gómez Martínez
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    Abstract

    The legal protection of property rights is increasingly viewed as a crucial, if not the crucial, condition for economic growth and pro-poor development. Empirical support is generally based on cross-national correlations between measures of secure property rights and good development outcomes in the long-run. However, whether these associations hold in the short- and medium-run has, to our knowledge, not been studied. In this paper, we evaluate the relationship between the protection of property rights and growth using three property rights indices from the Heritage Foundation, Fraser Institute and World Economic Forum covering the experience of 162 countries between 1995 and 2005. While we find a strong correlation between the level of country property rights protections scores and economic growth, when we evaluate the change and improvement in country ranking scores of property rights, this positive association disappears. These findings could be interpreted as indicating either that there is i) no causal relationship between property rights and growth (at least in the short-run), or that ii) the property rights indices have poor validity.

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    Paper provided by Political Economy Research Institute, University of Massachusetts at Amherst in its series Working Papers with number wp216.

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    Date of creation: 2010
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    Handle: RePEc:uma:periwp:wp216

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    Keywords: Property rights; Development; Pro-poor;

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    Cited by:
    1. Justesen, Mogens K. & Kurrild-Klitgaard, Peter, 2013. "Institutional interactions and economic growth: The joint effects of property rights, veto players and democratic capital," MPRA Paper 51773, University Library of Munich, Germany.
    2. Voigt, Stefan & Gutmann, Jerg, 2013. "Turning cheap talk into economic growth: On the relationship between property rights and judicial independence," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 66-73.

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