Property rights as a poverty reduction strategy: public or private good? A Case Study Analysis of Formal and Informal Property Rights in Three Sub-Saharan Africa Communities

Abstract

Property rights define the rules of the game for social and economic exchange. These rules, both formal and informal, ease the flow of information and lessen transaction costs to facilitate such exchange. In this way, property rights foster economic growth. As social institutions, however, property rights are constructed in many ways and are not always efficient. In fact, in some contexts property rights can hinder economic and social exchange. Several scholars attribute persistent poverty in developing countries to such inefficient property rights (North 1990, Desoto 2000) Specifically, some scholars contend that as exchange increases and grows more complex, informal property rights are less effective in monitoring and enforcing agreements (Sen 1999; Easterly and Levine 2002; Rodrik 2004). They argue that formal property rights are needed to increase the benefits of cooperative solutions or the costs of defection. On that basis, policymakers, academics and others increasingly promote formal property rights as a means to reduce poverty. This poverty strategy, however, assumes that a primary goal of poverty reduction is to increase personal and national income through greater production of private goods. What happens then when one pursues a poverty-reduction strategy where the goal is to produce superior public goods such as improved education, greater access to quality health care or less domestic violence? Do the strategies complement each other or could they potentially conflict with each other? This thesis explored this potential poverty-alleviation paradox by using a case study methodology to examine the different conditions in which formal and informal property rights support a social infrastructure to alleviate poverty. The findings were mixed, but suggest that informal property rights play a significant role in the creation of social capital, which support formal property rights as well as help the most vulnerable people cope. The findings related to the role of social capital in the creation of public goods was unclear but suggest that a distinction between weak and strong ties may be important.