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Property Rights and Economic Development: The Case of Sub-Saharan African Countries

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Economic and Political Institutions and Development

Abstract

This paper identifies the effects of property rights on the total factor productivity (TFP) across different property rights levels and income groups in Sub-Saharan Africa (SSA). This paper subdivides SSA countries by their property rights score and by their income levels. Then estimates a model in which TFP depends on human capital and institutional qualities. The results mainly show that private property rights have a positive and statistically significant effect on the TFP in SSA. A 1% increase in property rights is associated with more than 0.2% increase in the TFP in SSA. This result indicates that private property rights are important determinants in the process of economic development. If well-defined and enforced by state laws, private property rights will contribute to growth in SSA.

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Notes

  1. 1.

    I use the property rights score database by the “Heritage Foundation” in this paper. The component “property rights” of the economic freedom database refers to private property rights creation and protection by state enforced laws. Property rights scores are assigned from zero to one hundred, with higher scores indicating greater existence and enforcement of private property rights.

  2. 2.

    Political risks indicators—variables from the international country risk guide database (ICRG) and some economic freedom variables—property rights and government spending.

  3. 3.

    The average regional property right score from 1995 to 2007 is used as the property rights benchmark based on which the countries are subdivided into two sub-samples: the lower and the upper benchmark sub-samples. The average regional property rights score from 1995 to 2007 is equal 42.92. Countries with average property right score below this average are classified in the lower benchmark sub-sample. Those with the average score greater than the benchmark level are grouped in the upper benchmark sub-sample. The benchmark for the income sub-samples is the average regional income per capita over the period from 1995 to 2007. This average is 2767 using World Development Data (WDI). Countries with the average income per capita less than the regional average are grouped in the lower income sub-group and those with the average RGDP per capita greater than the regional average are classified in the upper income sub-sample.

  4. 4.

    The agreement of the people (1649), the English declaration of rights (1689), the Virginia Bill of Rights (1776), the Declaration of Independence (1776), the Northwest Ordinance (1787), and the U.S. Constitution (1787).

  5. 5.

    Robinson (2010) wrote “…to have become more prosperous, the Kongolese would need to have saved and invested in plows, for example. But this would not have been worthwhile in that any extra output they produced by using plows and wheels would have been expropriated by the king and his lords. Many people’s property rights were highly unsecured; many moved their villages away from roads so as to reduce the incidence of plunder.” In these circumstances, parliaments, rather than creating patent laws, were motivated to fight the king and defeat absolutism.

  6. 6.

    Botswana (BWA), Cameroon (CMR), Gabon (GAB), Gambia (GMB), Ghana (GHA), Ivory Cost (CIV), Kenya (KEN), Malawi (MWI), Mali (MLI), Mozambique (MOZ), Namibia (NAM), Niger (NER), Republic of Congo (COG), Senegal (SEN), Sierra-Leone (SLE), South Africa (ZAF), Tanzania (TZA), Togo (TGO), Uganda (UGA), Zambia (ZMB), Zimbabwe (ZWE).

  7. 7.

    The Heritage Foundation defines property rights as: an assessment of the ability of individuals to accumulate private property secured by clear laws that are fully enforced by the state. Property rights measures the degree to which a country’s laws protect private property rights and the degree to which its government enforces those laws. It also assesses the likelihood that private properties will be expropriated and analyzes the independence of the judiciary, the existence of corruption within the judiciary, and the ability of individuals and businesses to enforce contracts. The scores of property rights are ranked from zero to hundred. The more certain the legal protections of properties in a country, the higher the country’s PR score. Similarly, the greater the chances that the country’s government will expropriate properties, the lower score the country’s PR score. Intermediate scores are attributed to countries that fall between two categories.

  8. 8.

    The null hypothesis of unit root is rejected if the test statistic is significant (Levin et al. 2002; Im et al. 2003; Coe et al. 2009).

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Authors and Affiliations

  1. The World Bank Group, Washington, DC, USA

    Julie Lohi

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  1. Julie Lohi
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Correspondence to Julie Lohi .

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Editors and Affiliations

  1. Department of Economics, West Virginia University, Morgantown, WV, USA

    Joshua C. Hall

  2. West Virginia University, Morgantown, WV, USA

    Sara Harper

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Lohi, J. (2019). Property Rights and Economic Development: The Case of Sub-Saharan African Countries. In: Hall, J., Harper, S. (eds) Economic and Political Institutions and Development. Springer, Cham. https://doi.org/10.1007/978-3-030-06049-7_4

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