Effective Property Rights and Economic Development: Next Steps

and books devoted to the question of how to enhance economic growth, especially in the developing world. Actual progress on the ground, however, is mixed at best. While many areas enjoyed remarkable growth in incomes and living standards during the past three or four decades—Asia being a prime example—other regions noticeably lagged. In the words of a recent, thorough study by the World Bank, by the end of the 1990s, poverty rates in Sub-Saharan Africa, Latin America, and the Caribbean remained “stubbornly high.” If it were a matter of applying the standard neoclassical model used by many economists, solving the growth problem would be relatively easy, somewhat like baking a cake: add some capital (domestic or foreign), technology, and education to a fixed supply of labor and assume the presence of some basic market institutions, and growth of income per capita should follow inexorably. For our purposes here, the key assumption is that market institutions—specifically, the presence of widely recognized and enforceable property rights—are well functioning. Indeed, it is fair to say