[go: up one dir, main page]

IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/3940.html
   My bibliography  Save this paper

What determines protection of property rights ? An analysis of direct and indirect effects

Author

Listed:
  • Ayyagari, Meghana
  • Demirguc-Kunt, Asli
  • Maksimovic, Vojislav
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.

Suggested Citation

  • Ayyagari, Meghana & Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2006. "What determines protection of property rights ? An analysis of direct and indirect effects," Policy Research Working Paper Series 3940, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3940
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2006/06/07/000016406_20060607102405/Rendered/PDF/wps3940.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lo, Andrew W. & Mackinlay, A. Craig, 1997. "Maximizing Predictability In The Stock And Bond Markets," Macroeconomic Dynamics, Cambridge University Press, vol. 1(1), pages 102-134, January.
    2. William Easterly & Ross Levine, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1203-1250.
    3. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 222-279, April.
    4. Easterly, William & Levine, Ross, 2003. "Tropics, germs, and crops: how endowments influence economic development," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 3-39, January.
    5. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    6. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-963, September.
    7. Foster, F Douglas & Smith, Tom & Whaley, Robert E, 1997. "Assessing Goodness-of-Fit of Asset Pricing Models: The Distribution of the Maximal R-Squared," Journal of Finance, American Finance Association, vol. 52(2), pages 591-607, June.
    8. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    9. Meghana Ayyagari & Asli Demirgüc-Kunt & Vojislav Maksimovic, 2008. "How Well Do Institutional Theories Explain Firms' Perceptions of Property Rights?," The Review of Financial Studies, Society for Financial Studies, vol. 21(4), pages 1833-1871, July.
    10. Merton, Robert C., 1985. "On the current state of the stock market rationality hypothesis," Working papers 1717-85., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    11. Stijn Claessens & Luc Laeven, 2003. "Financial Development, Property Rights, and Growth," Journal of Finance, American Finance Association, vol. 58(6), pages 2401-2436, December.
    12. Leamer, Edward E, 1983. "Let's Take the Con Out of Econometrics," American Economic Review, American Economic Association, vol. 73(1), pages 31-43, March.
    13. Lo, Andrew W & MacKinlay, A Craig, 1990. "Data-Snooping Biases in Tests of Financial Asset Pricing Models," The Review of Financial Studies, Society for Financial Studies, vol. 3(3), pages 431-467.
    14. Thorsten Beck & Asli Demirgüç‐Kunt & Vojislav Maksimovic, 2005. "Financial and Legal Constraints to Growth: Does Firm Size Matter?," Journal of Finance, American Finance Association, vol. 60(1), pages 137-177, February.
    15. Daron Acemoglu & Simon Johnson, 2005. "Unbundling Institutions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 949-995, October.
    16. Beck, Thorsten & Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2002. "Financial and legal constraints to firm growth - Does size matter?," Policy Research Working Paper Series 2784, The World Bank.
    17. Sala-i-Martin, Xavier, 1997. "I Just Ran Two Million Regressions," American Economic Review, American Economic Association, vol. 87(2), pages 178-183, May.
    18. Mahoney, Paul G, 2001. "The Common Law and Economic Growth: Hayek Might Be Right," The Journal of Legal Studies, University of Chicago Press, vol. 30(2), pages 503-525, Part I Ju.
    19. Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 1998. "Regulatory Discretion and the Unofficial Economy," American Economic Review, American Economic Association, vol. 88(2), pages 387-392, May.
    20. repec:cup:macdyn:v:1:y:1997:i:1:p:102-34 is not listed on IDEAS
    21. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Christopher A. Hartwell, 2014. "Do (successful) stock exchanges support or hinder institutions in transition economies?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 2(1), pages 1-18, December.
    2. Ayyagari, Meghana & Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2012. "Financing of firms in developing countries : lessons from research," Policy Research Working Paper Series 6036, The World Bank.
    3. Durnev, Art & Fauver, Larry, 2008. "Stealing from Thieves: Firm Governance and Performance when States are Predatory," CEI Working Paper Series 2008-12, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    4. Romeu, Andrés & Martinez-Sanchez, Francisco, 2015. "Technological Development and Software Piracy," UMUFAE Economics Working Papers 43702, DIGITUM. Universidad de Murcia.
    5. Junbing Xu & Zhongmei Wei & Haitang Yao, 2022. "Can international students help enhance China's urban innovation?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2421-2433, September.
    6. Chien-Chi Chu & Sang-Bing Tsai & Yinghui Chen & Xiyang Li & Yuming Zhai & Quan Chen & Zeng Jing & Zeng-Zi Ju & Bin Li, 2017. "An Empirical Study on the Relationship between Investor Protection, Government Behavior, and Financial Development," Sustainability, MDPI, vol. 9(12), pages 1-14, November.
    7. KOUADIO, Hugues, 2015. "Constraints of SME in West Africa: the case of Côte d'Ivoire after the crisis," MPRA Paper 79055, University Library of Munich, Germany.
    8. Aurelien Quignon, 2022. "Market Regulation and Innovation: Direct and Indirect Effects," Journal of Industry, Competition and Trade, Springer, vol. 22(3), pages 429-456, December.
    9. Demirguc-Kunt, Asli, 2006. "Finance and economic development : policy choices for developing countries," Policy Research Working Paper Series 3955, The World Bank.
    10. GOMADO, Kwamivi Mawuli, 2018. "Diversité ethnique et déforestation dans les pays en développement: identification des principaux canaux [Ethnic diversity and deforestation in developing countries: identifying the transmission ch," MPRA Paper 89380, University Library of Munich, Germany.
    11. Fu, Tong & Cai, Chao & Jian, Ze, 2020. "The illusion of “win–win” solution: Why environmental regulation in china promotes firm performance?," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 366-373.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Beck, T.H.L., 2010. "Legal Institutions and Economic Development," Other publications TiSEM 8aa07b48-ce55-4cf6-8754-7, Tilburg University, School of Economics and Management.
    2. Lin, Chen & Man-lai Wong, Sonia, 2013. "Government intervention and firm investment: Evidence from international micro-data," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 637-653.
    3. Meghana Ayyagari & Asli Demirguc-Kunt & Vojislav Maksimovic, 2021. "Are large firms born or made? Evidence from developing countries," Small Business Economics, Springer, vol. 57(1), pages 191-219, June.
    4. Meghana Ayyagari & Asli Demirgüc-Kunt & Vojislav Maksimovic, 2008. "How Well Do Institutional Theories Explain Firms' Perceptions of Property Rights?," The Review of Financial Studies, Society for Financial Studies, vol. 21(4), pages 1833-1871, July.
    5. Wenming Xu & Guangdong Xu, 2016. "Truth and Robustness in Cross-country Law and Finance Regressions: A Bayesian analysis of the Empirical “Law Matters†Thesis," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 6(6), pages 1-6.
    6. Emenalo, Chukwunonye O. & Gagliardi, Francesca, 2020. "Is current institutional quality linked to legal origins and disease endowments? Evidence from Africa," Research in International Business and Finance, Elsevier, vol. 52(C).
    7. Abdoul’ Mijiyawa, 2013. "Determinants of property rights institutions: survey of literature and new evidence," Economics of Governance, Springer, vol. 14(2), pages 127-183, May.
    8. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2003. "Law and finance: why does legal origin matter?," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 653-675, December.
    9. Thorsten Beck & Ross Levine, 2008. "Legal Institutions and Financial Development," Springer Books, in: Claude Ménard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, chapter 11, pages 251-278, Springer.
    10. Ross Levine, 2005. "Law, Endowments and Property Rights," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 61-88, Summer.
    11. Barth, James R. & Lin, Chen & Lin, Ping & Song, Frank M., 2009. "Corruption in bank lending to firms: Cross-country micro evidence on the beneficial role of competition and information sharing," Journal of Financial Economics, Elsevier, vol. 91(3), pages 361-388, March.
    12. Wang, Cong, 2013. "Can institutions explain cross country differences in innovative activity?," Journal of Macroeconomics, Elsevier, vol. 37(C), pages 128-145.
    13. Thorsten Beck, 2003. "Small and medium enterprises, growth, and poverty : cross-country evidence," Policy Research Working Paper Series 3178, The World Bank.
    14. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2003. "Law, endowments, and finance," Journal of Financial Economics, Elsevier, vol. 70(2), pages 137-181, November.
    15. Simplice A. Asongu & Oasis Kodila-Tedika, 2018. "Determinants of Property Rights Protection in Sub-Saharan Africa," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 9(4), pages 1291-1308, December.
    16. Mr. Charalambos G Tsangarides, 2005. "Growth Empirics Under Model Uncertainty: Is Africa Different?," IMF Working Papers 2005/018, International Monetary Fund.
    17. Lubna Hasan, 2007. "Myths and Realities of Long-run Development: A Look at Deeper Determinants," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 46(1), pages 19-44.
    18. Thorsten Beck & Asli Demirgüç-Kunt, 2004. "SMEs, Growth, and Poverty," World Bank Publications - Reports 11278, The World Bank Group.
    19. Tausch, Arno, 2016. "‘Smart development’. An essay on a new political economy of the environment," MPRA Paper 70204, University Library of Munich, Germany.
    20. Siddiqui, Danish Ahmed & Ahmed, Qazi Masood, 2013. "The effect of institutions on economic growth: A global analysis based on GMM dynamic panel estimation," Structural Change and Economic Dynamics, Elsevier, vol. 24(C), pages 18-33.

    More about this item

    Keywords

    Legal Institutions of the Market Economy; Judicial System Reform; Anthropology; Gender and Law; Legal Products;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:3940. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.