Strategizing actors and agents in the functioning of informal property Rights: The tragicomedy of the extralegal housing market in China

Abstract

This paper engages with the ongoing theoretical enquiry into the actual functioning and diverse practices of informal property rights. Departing from the prevailing neoliberal perspective and the credibility thesis, this paper develops a framework of institutional analysis to understand the functioning and regional variation of informal property rights. It takes the institutions-as-equilibria perspective and situates both structural and endogenous institutional variables in actors’ strategic choices. We test our conceptual framework through a multisite empirical study of extralegal and untitled housing in China. Building on game theory, archival research, and fieldwork, we compare the key variables contributing to the divergent fortunes of extralegal and untitled housing property rights in three Chinese cities: prospering in Shenzhen, selectively interfered with in Beijing, and eliminated in Sanya. The functioning of informal property rights is found to be contingent upon diverse strategic interactions of local governments and key local stakeholders. Our paper highlights the formation of local actors’ behavioral beliefs and their adjustment through a nonlinear feedback mechanism. It suggests the necessity and significance of integrating structural and endogenous institutional variables, elaborating on the interplay of formal and informal institutions, and applying the microeconomic and dynamic perspectives to better understand the functioning and diverse practices of informal property rights in the developing world.