The link between property rights and prosperity has been well documented. Property rights are the key to freedom and progress. They not only create incentives to create and innovate, but also to take care of property since they allow individuals to use resources as they see fit, either for profit or not, to hold as a form of insurance, or to facilitate access to capital. When property rights are secured, individuals enjoy greater protection from poverty since they are better able to develop both economically and socially.
As the graph below shows, countries that score better on the International Property Rights Index –which evaluates a country’s legal and political environment, and the state of physical and intellectual property rights around the world– also enjoy higher levels of income per capita. Moreover, in Property Rights and the Wealth of Nations: A Cross-Country Study, economist Bernhard Heitger shows that well-defined property rights not only improve efficiency and increase income per capita, but also “significantly raise the accumulation of physical and human capital.”
Source: International Property Rights Index and World Bank
Likewise, the lack of property rights has a negative impact on individuals, their families, and communities. As Karol Boudreaux states: “when property is owned by no one, or by society at large, people tend to take less care of it. The result is the now-famous ‘tragedy of the commons’ in which resources are overused, misused, and abused because no one owns them.” She adds: “Under open-access and government-property ownership, property users have incentives to take all they can, as fast as possible, otherwise they will ‘lose out’ to others. The result, which we see all around us, is that both open-access and government-property resources tend to be overused and under-maintained.”
Today, 2.7 billion people live on less than $2 per day. Of those, according to Landesa, a nonprofit organization dedicated to securing legal land rights for world’s poorest families, one billion live in rural areas and lack property rights. According to the Rockefeller Foundation, this can be due to several factors: (1) the law does not guarantee property rights; (2) the law guarantees property rights but there are also cultural barriers to the exercise of this right, as is the case of a large number of women in the Middle East and North Africa; or (3) individuals lack the ability to exercise existing property rights because of lack of information, or due to socio-economic limitations. One could also add that the bureaucratic procedures individuals face when –and also after– registering a property constitute a barrier to the exercise of their rights as landowners.
Source: Landesa
In the case of individuals who, in addition to being poor, live in rural areas, having secure and defined property rights over their land can make the difference. The data collected by Landesa suggest that agricultural production increases by 60 percent, investment in these individuals’ property doubles, and the annual family income increases by 150 percent with land titling. Moreover, teen pregnancy is reduced by half, high school graduation rates double, and the number of hours worked increases by 17 percent.
Property rights form the basis of a whole range of human progress, economic and otherwise. Securing these rights for the poor should be at the top of any developing country’s agenda.