Essays in Applied Property Rights Economics

Jacob W. Russ

Major Professor: Peter T. Leeson, PhD, Department of Economics

Committee Members: Peter J. Boettke, Thomas Stratmann

Mercatus Center, World Markets Conference Room
June 17, 2015, 03:30 PM to 11:30 AM

Abstract:

Economists today recognize that property rights play an important role in the coordination of economic activity. Well-defined and enforced property rights lower the transactions costs of exchange, shape competitive forces in the marketplace, and constrain participants by providing incentives to resolve their conflicts of interest.

This dissertation furthers our understanding of how property rights function by empirically examining two environments where property rights are either incomplete or unenforced. Consisting of three essays, this work demonstrates the continued strength of the property rights framework for economic analysis and illustrates the potential for destructive institutions to emerge in settings that lack property rights. 

The great age of European witch trials (c.1550-1700) involved the prosecution of no fewer than 80,000 persons for witchcraft and claimed the lives of no less than half of them. The first chapter develops and empirically investigates an economic theory of these trials. We argue that European witch trials reflected non-price competition between the Catholic and Protestant churches for religious market share in confessionally contested parts of early modern Christendom. To evaluate this theory we construct the largest and most comprehensive database on witch trials to date, consisting of more than 43,000 accused witches in more than 11,000 trials across 323 European counties over a period of five-and-a-half centuries. We combine our witch-trial records with novel data on confessional battles to measure religious-market contestation across Europe over time. Analyses of these data and additional micro-level data on the evolving confessional identities of early modern European cities and witch-trial administrators support our theory. 

The next two chapters of this dissertation examine the persistent poverty of American Indians in the contemporary United States in light of the peculiar property rights arrangements over reservation land. 

The second chapter analyzes the economic consequences of property institutions. Federal land reform policy privatized American Indian reservation land in the 1880s. This reform intended to foster economic development on American Indian reservations by creating a system of individual private property. However, these new ownership rights were incomplete and accompanied by restrictions that have led to the fragmentation of land parcels into millions of shared ownership claims, known as fractionation. Because land rights on Indian reservations do not include all of the sticks in the traditional property rights bundle, Indians face higher costs for real estate transactions. These additional costs preclude exchange and impede the productive use of reservation-land resources. Using data on Indian land ownership and agricultural leases in 2010, we provide the first quantitative evidence that incomplete property rights have worsened economic outcomes on Indian reservations. Our results show that increased ownership fractionation has reduced the incomes of American Indians on reservations and is associated with lower agricultural lease income, a measure of land productivity. 

The final chapter continues our examination of fractionation on American Indian reservations and offers the first empirical evidence of fractionation’s exponential growth path. First, we provide a statistical profile of Indian land ownership characteristics at twelve reservations in 2010 and compare it to data on these same reservations eighteen years earlier. In 1992 the General Accounting Office (GAO) published a quantitative survey of Indian land ownership of twelve reservations, which was the first and still is the only survey of Indian land ownership. Our study finds that fractionation has nearly doubled between 1992 and 2010. We also evaluate several Congressional and BIA efforts to eliminate fractionation and show that no legislative remedy has proven to be the solution for fractionation in Indian country. Additionally, we find that the growth fractionation increases the BIA’s complex recordkeeping workload with each passing year. In 1992, the GAO estimated that BIA’s recordkeeping costs for these twelve reservations were between $60 and $77 million (in 2010 dollars). With the addition of over a million new ownership records by 2010, due to fractionation, we estimate yearly recordkeeping costs have increased to $246 million.

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