Do Property Rights Institutions Matter at the Local Level? Evidence from Madagascar

Abstract

While several cross-country studies have demonstrated that property rights institutions are crucial for economic growth, empirical evidence of this relationship within countries is limited. This article analyses the link between property rights institutions and development at a local level with two rounds of a unique dataset covering almost all of Madagascar at a level akin to counties in the United States. We find robust evidence that property rights institutions in the form of formal land titles do matter for the emergence of large firms at very low administrative levels. We also find evidence that growth in enterprise development strengthens formal property rights, supporting the notion that the causality between institutions and growth runs both ways even at a low administrative level.