File2-page66 - (i level effect overall reduction in...

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Property Rights - means of reducing uncertainty by establishing a stable structure for human interactions - property rights investment incentives growth Problem - institutional environment endogenous and evolves slowly over time - makes answering these questions difFcult at a point in time - look at this issue at cross-country, cross-region and micro house- hold levels isolating exogenous variation in property rights is the key problem that we face Links between Property Rights and Investment Decisions Theoretical literature discussed three channels - lets the example of prop- erty rights over land 1. Risk of Expropriation insecurity - like random tax on returns of investment
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Unformatted text preview: (i) level effect - overall reduction in investment (ii) composition effect - invest in assets which are vulnerable to ex-propriation 2. Gains from Trade • gains from trade may be realised institutions where land is disposed of to someone who has a better use for it (standard comparative ad-vantage argument)- incomplete property rights - impair trade in land - true, in particular, for rights to sell or rent land- improving possibilities for trade in land can improve investment in-centives when the gains from trade raise the marginal returns to land Development Economics, LSE Summer School 2007 63...
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