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Partisanship versus Institutions as Determinants of Property Rights: Firm-Level Evidence

by Stephen Weymouth and J. Lawrence Broz. Reading for Tuesday, 26 February 2008.

We offer the first firm-level, quasi-experimental evidence on the determinants of property rights protections. Unlike research that uses country-level aggregates to draw inferences about the determinants of secure property rights, we analyze survey responses of over 5000 firm owners from 53 countries. Another innovation is that we use a quasi-experimental research design to establish causality and hold firm- and country-level fixed effects constant. We find that the political partisanship of the government in power strongly affects individual perceptions of property rights: firm owners are more likely to perceive that their property rights are secure under right-leaning, conservative governments. We find little support for the claim that formal political institutions, such as the number of checks and balances (veto players) in a system, improve property rights perceptions. Overall, our results indicate that firm owners’ beliefs about the security of property rights are highly responsive to changes in government partisanship.

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