Securing Property Rights
AbstractA central challenge in securing property rights is the subversion of justice through legal
skill, bribery, or physical force by the strong—the state or its powerful citizens—against the
weak. We present evidence that the less educated and poorer citizens in many countries feel their
property rights are least secure. We then present a model of a farmer and a mine which can
pollute his farm in a jurisdiction where the mine can subvert law enforcement. We show that, in
this model, injunctions or other forms of property rules work better than compensation for
damage or liability rules. The equivalences of the Coase Theorem break down in realistic ways.
The case for injunctions is even stronger when parties can invest in power. Our approach sheds
light on several controversies in law and economics, but also applies to practical problems in
developing countries, such as low demand for formality, law enforcement under uncertain
property rights, and unresolved conflicts between environmental damage and development.