Better Safe than Sorry: How Property Rights and Veto Players Jointly Affect Economic Growth

A growing literature argues that division of powers matter for economic growth by increasing the security of property rights. However, less effort has been devoted to examining the political and institutional conditions under which property rights have economic effects. This paper emphasizes that the economic effects of property rights depend on the division of powers between veto players, meaning that the interaction of veto players and property rights matters for economic growth. This argument is tested empirically on a panel of developing countries. The results show that the economic effects of property rights increase significantly as power sharing between veto players increases. This suggests that property rights matter mainly in the context of institutions dividing political powers between veto players.