What Determines Protection of Property Rights? An Analysis of Direct and Indirect Effects

54 Pages Posted: 20 Apr 2016

See all articles by Vojislav Maksimovic

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business

Meghana Ayyagari

George Washington University - School of Business

Asli Demirgüç-Kunt

World Bank

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2006

Abstract

Using cross-country data, the authors evaluate historical determinants of protection of property rights. They examine four historical theories that focus on conceptually distinct causal variables believed to shape institutions: legal origin, endowments, ethnic diversity, and religion. There is only one realization of the data with relatively few observations, which have by now been well explored in the literature. Given the correlations between the explanatory variables, it is difficult to fashion empirical tests which are consistent in their treatment of the competing theories and to know which regressions to take seriously, giving rise to competing interpretations in the literature. The authors use Directed Acyclic Graph (DAG) methodology to identify which historical factors are direct determinants of property rights protection and which are not, and subject the outcomes to a battery of robustness tests. The empirical results support ethnic fractionalization as a robust determinant of property rights protection. Despite the attention it has received in the literature, the impact of legal origin on protection of property rights appears fragile and dependent on the inclusion of transition economies in the sample.

Keywords: Legal Institutions of the Market Economy, Judicial System Reform, Anthropology, Gender and Law, Legal Products

Suggested Citation

Maksimovic, Vojislav and Ayyagari, Meghana and Demirgüç-Kunt, Asli, What Determines Protection of Property Rights? An Analysis of Direct and Indirect Effects (June 1, 2006). World Bank Policy Research Working Paper No. 3940, Available at SSRN: https://ssrn.com/abstract=923247

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business ( email )

Van Munching Hall
College Park, MD 20742-1815
United States
301-405-2125 (Phone)
301-314-9157 (Fax)

HOME PAGE: http://scholar.rhsmith.umd.edu/vmax/home

Meghana Ayyagari (Contact Author)

George Washington University - School of Business ( email )

Washington, DC 20052
United States

Asli Demirgüç-Kunt

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States