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Unveiling de Soto's mystery: property rights, capital formation, and development

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  • KEREKES, CARRIE B.
  • WILLIAMSON, CLAUDIA R.

Abstract

Hernando de Soto attributes the poor economic performance of developing countries to insecure property rights. When property rights are not well-defined individuals do not have the incentives to invest in capital, and assets cannot be used as collateral, hindering capital formation and economic growth. This paper tests de Soto's hypothesis empirically by examining how the security of property rights impacts wealth, collateral, and capital formation across nations. Using several different measures and model specifications, we find support for de Soto's conjecture. Our results suggest that better defined property rights would result in substantial improvements in capital formation and economic growth in developing countries.

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  • Kerekes, Carrie B. & Williamson, Claudia R., 2008. "Unveiling de Soto's mystery: property rights, capital formation, and development," Journal of Institutional Economics, Cambridge University Press, vol. 4(3), pages 299-325, December.
    • Handle: RePEc:cup:jinsec:v:4:y:2008:i:03:p:299-325_00
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    Cited by:

    1. Cagé, Julia, 2009. "Growth, Poverty Reduction and Governance in Developing Countries: a Survey," CEPREMAP Working Papers (Docweb) 0904, CEPREMAP.
    2. Joshua Ang & Jason C. Patalinghug, 2021. "Property rights and economic growth: A dynamic GMM analysis," Economics Bulletin, AccessEcon, vol. 41(3), pages 1387-1398.
    3. Murtazashvili,Jennifer Brick & Murtazashvili,Ilia, 2021. "Land, the State, and War," Cambridge Books, Cambridge University Press, number 9781108493413, January.
    4. Ashley Gunter & Kenneth Manuel, 2016. "A role for housing in development: Using housing as a catalyst for development in South Africa," Local Economy, London South Bank University, vol. 31(1-2), pages 312-321, February.
    5. Ilia Murtazashvili & Jennifer Murtazashvili, 2015. "Anarchy, self-governance, and legal titling," Public Choice, Springer, vol. 162(3), pages 287-305, March.
    6. Yu, Shu & Beugelsdijk, Sjoerd & de Haan, Jakob, 2015. "Trade, trust and the rule of law," European Journal of Political Economy, Elsevier, vol. 37(C), pages 102-115.
    7. Gurvich, Evsey, 2016. "Institutional constraints and economic development," Russian Journal of Economics, Elsevier, vol. 2(4), pages 349-374.
    8. Yasir Khan & Attiya Yasmin Javid, 2015. "The Impact of Formal and Informal Institutions on Economic Performance: A Cross-Country Analysis," PIDE-Working Papers 2015:130, Pakistan Institute of Development Economics.
    9. Ceyhun Haydaroglu, 2015. "The Relationship between Property Rights and Economic Growth: an Analysis of OECD and EU Countries," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 4, pages 217-239, December.
    10. Ferreira, Frederico Poley Martins & Ávila, Paulo Coelho, 2018. "Who has secure land tenure in the urban areas of Brazil? Evidence from the state of Minas Gerais," Land Use Policy, Elsevier, vol. 75(C), pages 494-504.
    11. Claudia Williamson, 2009. "Informal institutions rule: institutional arrangements and economic performance," Public Choice, Springer, vol. 139(3), pages 371-387, June.
    12. Audrey Redford, 2020. "Property rights, entrepreneurship, and economic development," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 33(1), pages 139-161, March.
    13. Dobler, Constanze, 2009. "The impact of institutions, culture, and religion on per capita income," Violette Reihe: Schriftenreihe des Promotionsschwerpunkts "Globalisierung und Beschäftigung" 28/2009, University of Hohenheim, Carl von Ossietzky University Oldenburg, Evangelisches Studienwerk.
    14. Williamson, Claudia R., 2012. "Dignity and development," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(6), pages 763-771.
    15. Fruet Cardozo, J. Vicente & Muñoz Fernández, Guzmán A., 2015. "Paraguay: a housing finance proposal for middle- to low-income groups," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.

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