Institutional Change in the Horn of Africa

Abstract

Traditional theories of property rights change have posited an evolutionary progression of property rights towards private property in response to changes in the relative price ratio of land compared to the other factors of production. Using case studies from two areas of Ethiopia and one area of Eritrea the dissertation demonstrates the role of political factors such as interest group preference and state intervention in directing property rights development away from a linear path. The case studies trace the development of three separate systems of property rights throughout the twentieth century up to the Ethiopian revolution of 1974. Analysis of history and litigation in the three areas demonstrates that in none did property rights evolve spontaneously towards privatization. In one area of the study relative price changes did not lead to changes in the system of property rights as the theory predicts. In the other two areas, changes in property rights followed a change in the relative price of land, but these changes were brought about exogenously, by the intervention of the government or interest groups in guiding property rights in a particular direction. There are two theoretical conclusions to the study 1) property rights development does not always occur when we expect it to, other factors such as vested interests and government reluctance can intervene with their development and 2) even if property rights do change in response to relative price changes, they may not always move towards privatization or greater specification. In addition, one interesting empirical result of the research was that in communal systems of land tenure the transaction costs of land transfer are higher, leading to a drag on economic efficiency in the overall economy of the region. Generally, the incorporation of political factors into the model of changing property rights leads to a less parsimonious, but more accurate description of the progression of land rights in developing countries in particular.