«August 2013 Property rights and development briefing: Property rights and economic Growth Anna Locke Shaping policy for development odi.org ...»
Property rights and development briefing:
Property rights and economic Growth
Shaping policy for development odi.org
Comments and feedback during the study were provided by Steve Wiggins, Senior
Research Fellow, ODI.
This material has been funded by UK aid from the UK Government’s Department for
International Development Policy Research Fund, however the views expressed do not
necessarily reflect the UK Governments official policies.
Table of contents Acknowledgements ii Executive summary ii 1 Background and objectives 1 2 Approach and methodology 2
2.1 Search strategy 3
2.2 Derivation of the evidence base 3 3 Property rights and economic growth — theoretical and conceptual issues 6
3.1 Defining secure property rights 6
3.2 Growth and its determinants 7
3.3 Why private property rights matter for growth — a theory of change 8 3.4 … and why they might not 9
3.5 Economic growth research questions 10 4 Evidence on each research question 12
4.1 General characteristics of the evidence 12
4.2 Evidence for research question 1: investment and productivity 13
4.3 Evidence for research question 2: collateral-based finance 17
4.4 Evidence for research question 3: allocative efficiency 18
4.5 Evidence for research question 4: distribution of property and growth 18 5 Evidence gaps and implications for further research 20 References 21 Appendix 27 Experts interviewed for this briefing paper 27 Figures Figure 1: Summary of growth economics 8 Figure 2: Diagram of Theory of Change – Property Rights and Economic Growth 11 Tables Table 1: Studies downloaded from Scopus 3 Property rights and development briefing: i Executive summary This Briefing Paper presents the debate on the impact of formalised land rights on economic growth through the vectors of increased investment, credit and efficiency. At the request of DfID, the paper also considers the impact of titling on the distribution of control of property and of growth. Drawing on this debate, it identifies key research questions and weighs up the evidence to answer these questions, discussing the nature of the evidence available and highlighting gaps in current evidence that need to be tackled through further research.
Overall, the evidence reviewed on the link between secure property rights and growth focuses mainly on the impact on investment and productivity. While there is a medium/large body of evidence of mainly high quality supporting the link, there are also a high number of studies that question this link and the strength of the evidence, mainly on methodological issues.
Contradictory evidence is put forward that identifies factors other than property rights as being of primary importance for growth, such as skills, while a criticism is that the analysis fails to recognise the “cluster of institutions” that drive growth. Analysis of the relevance of other drivers of growth is based on the same dataset as used to support the link, while other analysis adjusts the dataset slightly and finds that the positive link no longer holds, particularly for developing countries. Other concerns include the difficulty of proving causality between secure property rights and growth as opposed to correlation, and the direction of that causality. Finally, concerns are raised that the measures commonly used for property rights in the cross-country literature are not adequate proxies for institutions.
While there is more substantial literature looking at effects at household level of different drivers of growth, such as credit and allocative efficiency, there is not much literature that looks at this at a larger firm, or cross-country, level.
Several research gaps were identified in this study:
Collection and analysis of more and better quality micro level data on the impact of secure property rights on firms’ investment decisions within countries to complement and test the results from cross-country analysis.
Collection and analysis of data on the impact of secure property rights on collateral-based finance at a macro/large firm level.
Collection and analysis of data on the impact of secure property rights on allocative efficiency at a macro/large firm level.
Collection and analysis of data on the impact of more formal property rights on the distribution of property and benefits from growth at a national/crosscountry level.
Property rights and development briefing: ii1 Background andobjectives
This Briefing Paper aims to look at the state of evidence on the link between secure property rights and development in the case of rural households, with an emphasis on recent evidence in African countries, and identify where there are significant gaps that need to be plugged by further research. In line with DfID’s definition of a Literature Review, this is designed to be a “review of main literature in the field including all major research studies”.1 This Briefing Paper forms part of a wider study commissioned by DfID to contribute to
debates on the link between property rights and development in two principal arenas:
The Golden Thread narrative of the UK government, which emphasises secure property rights as a key element of promoting economic growth and development: “A genuine golden thread would tie together economic, social and political progress in countries the world over… Only then will people escape the fear of seeing their homes bulldozed just because they don't have property rights.” Such rights would be underpinned by mapping and formal cadastre systems “…using satellite photos to map plots of land that will facilitate the creation of property rights” (Cameron 2012).
DfID country programmes on property rights, which have ranged from support to land administration systems to funding individual and community titling in different countries.
Underpinning this is a broad agreement that secure property rights are necessary for development, expressed in terms of equitable growth, household welfare, and social and political engagement. Implicit in such discussions is the view that private, individual tenure is the most appropriate form for guaranteeing security of property rights. However, others argue for promoting tenure security under different mechanisms rather than private land ownership. This is particularly the case in sub-Saharan Africa where forms of customary tenure emphasise membership of communities as the basis for access to land and therefore prioritise territorial control by collective units over private conceptions of property rights.
In parallel, there is a discussion on how the link between property rights and development is influenced by a range of other factors that may be equally, or more, important that property rights per se.
Summary table of evidence products – DfID 2012.
A team of five researchers carried out the overall literature review, with the support of a research assistant. A senior review team, comprising mainly external academics specialising in the themes covered in this study, provided input into the conceptualisation of the research questions and search strategy, suggested additional literature and reviewed the draft and final reports.
The general study looks at the role of property rights in promoting development in five
areas agreed between DfID and ODI:
Property rights and economic growth at a macro level Land property rights and rural household welfare Water rights and rural household welfare Property rights and urban household welfare Property rights and social, political and economic empowerment The evidence assessed by the review team is presented for each theme in the form of a
Briefing Paper, comprising:2
Discussion of the conceptual framework, context and theory of change;
Assessment of evidence for each research question; and Identification of research gaps.
Using DfID’s theory of change framework (Vogel 2012), we look at the links for each component between property rights and development to: identify endpoint outcomes and how they would be measured; key determinants of such outcomes; and the central transmission mechanisms between secure property rights and each outcome.
In each theme, we define a set of research questions that help us to test the hypothesis presented in the theory of change. Identifying and assessing such evidence inevitably involves a discussion on the form that such property rights need to take and the influence of other factors on the link.
An important point of orientation for the study was DfID’s Rapid Review on the “Golden Thread of International Development”, 3 which explores the evidence on different pathways to the triple objectives of growth, poverty reduction and civil liberties, and DfID’s rapid review of the literature on property rights (Selvetti 2012).
In the case of the rural and urban household papers and the growth paper, an overview is provided drawing out common and contrasting findings.
DFID Research and Evidence Division: The research evidence relating to a “golden thread of international development”: a rapid review (undated)
The literature review combined three tracks of literature searches:
1. Bibliographic database search of academic databases and journals, using consistent search strings that have been tested beforehand and a set of inclusion criteria, and conducting forward and backward searches on key references. Three main databases were used for the search: Scopus, Google Scholar and Web of Science. These were complemented by searches of key institutional databases, particularly World Bank, FAO Agris and DfID’s R4D website.
2. Snowball technique of contacting experts in the field (see Annex 1) to ask them recommendations for important studies on the research question as well as insights into the key propositions.
3. Hand-searching specific websites for relevant studies using similar search terms as for the bibliographic databases.
The strategy focused on literature on Africa produced from 2000, using literature produced between 1990 and 2000 where recommended by the senior review team or where such references were frequently cited in the more recent literature. The search strategy focused on literature published mainly in peer review journals and principally in the English language, partly because of the way that the databases operate and partly due to the criteria in DfID’s draft guidelines for assessing evidence quality.
Table 1 presents an example of the results of the search conducted through Scopus for the five themes covered. To these were added other references picked up in the search process.
The review team then screened all references to identify the most relevant material.
Table 1: Studies downloaded from Scopus
2.2 Derivation of the evidence base In this section, we discuss the potential impact of the search strategy and evidence quality assessment criteria in deriving the evidence base that underpins the key finding of the Briefing Papers.
2.2.1 Issues raised by the search strategy Although the strategy was designed to do a wide-ranging search and include as many relevant studies as possible, the results of the search process highlighted some potential bias
towards particular types of studies and evidence, namely:
Property rights and development briefing: 3 Literature published in journals While efforts were made to include other types of papers, including working papers, conference papers and other reports, most of the papers selected and analysed were journal articles or working papers intended for publication, and excluded books (including edited volumes and monographs). This is due mainly to the greater visibility and accessibility of journal articles through database searches as they generally include full metadata which is picked up by search engines. Such articles are also more likely to be cited and referenced in other studies.
Explicitly empirical and economic-based papers The explicit focus on ‘evidence’ in the review process is likely to have led to bias towards papers which emphasise their methodology or use of data. On the whole, papers from the economics discipline were more likely to include more details on their use of ‘data’ and ‘evidence’, although a loose application of search terms (i.e. relaxing use of ‘data’ or ‘evidence’ was consciously used in order to include other terms. As a result, perspectives from some disciplines are not fully represented, notably history, politics, anthropology, cultural studies and sociology.
2.2.2 Impact of the methodology to assess quality of evidence The exclusion of particular types of evidence by the search strategy is compounded by the criteria for assessing the quality of the evidence that could be considered, provided in
DfID’s draft Guidelines (Assessing the Quality of Social Science Research Evidence:
Summary)4 a revised version of which was subsequently published online. This emphasises measurement aspects of evidence, in the principles of validity and reliability, implying a preference for quantitative studies over qualitative studies using inductive methods.
Focus on particular types of evidence In the context of research on property rights, the implicit preference for quantitative studies runs the risk of excluding a significant body of work relevant to the issue and providing only for a partial review of the evidence. The different standards of emphasis on, and transparency of, research design and methods in different disciplines may also mean that research produced by those disciplines that bring design and methodology to the fore are likely to be given higher quality scores.