Development Barriers - Property Rights and Corruption

In this new revision video we look at the significance of inadequate property rights and endemic corruption as barriers to economic development.

What are property rights?

Property rights define the theoretical and legal ownership of resources and how they can be used. These resources can be both tangible (land) or intangible (IP) and can be owned by individuals, businesses, and governments.

Why might the absence of property rights hinder development?

1. Protected rights stimulate investment such as in farmland – this is crucial to improving yields
2. Government can generate land-based taxes to then invest in social infrastructure
3. Secure rights protect the environment – for example, can be used to help fight deforestation
4. Land rights essential for urban development - Assigned parcels of land stimulates growth of cities
5. People with land ownership can borrow against their property (collateral) and create capital
6. Gender empowerment - many women around the world continue to be denied any land rights
7. Protection of intellectual property promotes potential rewards from research and innovation

Why might high levels of corruption act as a barrier to development?

High levels of corruption damages long term growth & development:

1. Deters foreign investment by increasing the cost and risk of doing business in a country
2. Leads to allocative inefficiency diverting public resources for private gain, there are numerous examples of extravagant wealth in economically less developed countries
3. Government decisions are often unduly influenced by lobbying
4. Contributes to persistent income & wealth inequality and reduced progress in cutting extreme poverty
5. Causes a loss of trust and a breakdown of social capital
6. Leads to poorer human development outcomes because governments are not collecting sufficient tax revenues