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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

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.

Suggested Citation

  • Lawrence King & Osvaldo Gómez Martínez, 2010. "Property Rights Reform and Development: A Critique of the Cross-National Regression Literature," Working Papers wp216, Political Economy Research Institute, University of Massachusetts at Amherst.
    • Handle: RePEc:uma:periwp:wp216
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    3. Falguni Pattanaik & Narayan Nayak, 2014. "Economic freedom and economic growth in India: What is the empirical relationship?," Economic Change and Restructuring, Springer, vol. 47(4), pages 275-298, November.
    4. 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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    More about this item

    Keywords

    Property rights; Development; Pro-poor;
    All these keywords.

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P14 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Property Rights

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