Uncertain Property Rights and Agricultural Production: Evidence from Post-Gold-Rush California

Abstract

This paper uses data from California in 1860, a period in which property rights were uncertain, to investigate the relationship between the certainty of property rights and agricultural production. The negative effect of uncertain property rights on farm values, crop production, and wheat productions was large. For example, crop values for preemptors, who had more uncertain property rights than other farmers, were 22-38 percent lower than other farmers. This is consistent with contemporary discussion of the period, which linked uncertain property rights to low investment in the land and the use of short season crops. Less obviously, the mix of products was also significantly affected. Farmers with less secure property rights produced less as measured by crop value than similar farmers with more secure property rights, but owned similar amounts of livestock, presumably because it was mobile. In aggregate, uncertainty depressed the value of crop output by 13-20 percent. The results have implications for understanding the historical development of agriculture in the United States, since squatting on agricultural land was prevalent throughout the United States, and for understanding agriculture in the Third World, since uncertain property rights in agricultural land are still an issue today.