On the Other Side of the Fence: Property Rights and Productivity in the United States

Abstract

Abstract Can well-defined access rights to publicly owned land be as effective as privatization in increasing productivity and wealth? In this paper, I evaluate the impact of public property rights using the 1934 Taylor Grazing Act, which determined secure access rights for ranchers to newly created, large grazing districts in the Western United States. Using satellite-based vegetation data, I exploit spatial discontinuities across grazing district boundaries and find that public lands with well-defined access rights for ranchers are at least 10% more productive than lands without. Immediately after establishing grazing districts, ranchers inside these districts held more cattle, and reported higher income and farm values than their counterparts outside. Despite ranchers being unable to invest in publicly owned lands, these magnitudes are similar to outright privatization. Instead, I argue that secure access rights resolve uncertainty around future usage and align the incentives of ranchers and regulators, thus incentivizing sustainable and profitable usage. I provide two results supporting this hypothesis: Areas with stronger pre-reform state capacity show larger increases in vegetation; and, monthly patterns on vegetation are consistent with the adoption of productivity-increasing fallowing practices. I investigate alternative explanations, and find no empirical support for differential initial productivity, negative spillovers, or systematic local manipulation of boundaries.