The Political Economy of Property Rights Discrimination.

Abstract

A seemingly unassailable consensus in political economy states that secure and private property rights are the institutional guarantor of economic growth. In this dissertation, I dispute this conventional account and propose a new understanding of property rights institutions, their effect on economic activity, and their political origins. I assume that economic agents demand — and politicians can provide — property rights discrimination, protecting certain groups rights while willfully ignoring or deliberately others’. Property rights discrimination shapes economic inequality and threatens per capita economic growth. In turn, it is the result of a bargaining process between citizens and politicians. The design of political institutions and citizens’ different obstacles to collective action underlie the shape of that bargain.

Empirically, I use firm-level surveys from the World Bank to provide statistical evidence of property rights discrimination’s existence, consequences, and origins. Careful examination of firm managers’ responses supports the proposition that individuals’ confidence in the security of their property rights varies both within and across countries. I find tentative evidence that firm managers with less confidence in their private property rights invest less, operate at lower capacity, and hide a larger percentage of their revenues from the State, all else equal. I also find that national-level informality responds to property rights discrimination. Finally, I find evidence that autocratic regimes more likely discriminate in favor of politically influential firms than democratic or mixed regimes.

A number of factors suggest the utility of marrying small-n case analysis with this statistical research. Therefore, I shift focus and method, discussing the reform of rules governing land rights in Colombia in the late nineteenth and early twentieth centuries. Colombia’s insertion into the world economy raised demand for land fertile for growing coffee. I show how large landowners and peasants competed over land rights through a lengthy and sometimes violent political process. Peasants’ inability to create enduring forms of collective action, estate owners’ economic power and Colombia’s rigidly bipartisan system facilitated the creation of land rights institutions that heavily favored large landowners.