The political economy of rural property rights and the persistence of the dual economy

Abstract

Rural areas often have more than one regime of property rights and production. Large, private-property farms owned by powerful landowners coexist with subsistence peasants who farm small plots with limited property rights. At the same time, there is broad consensus that individual, well-specified and secure property rights over land improve economic outcomes. If property rights in land are so beneficial, why are they not adopted more widely? I put forward a theory according to which politically powerful landowners choose weak property rights to impoverish peasants and force them to work for low wages. Moreover, because weak property rights force peasants to stay in the rural sector protecting their property, the incentives to establish poor property rights are especially salient when peasants can migrate to an alternative sector, such as when urban wages increase with industrialization.