Missing Sticks: Property Institutions and Income Dissipation in Indian Country

Abstract

This paper 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. 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.