Readers Question: Please explain the role that property plays in a country’s economic development.
Property rights are important for giving firms the incentive and confidence to invest. Firms need a profit incentive to invest in buying capital and investing in equipment. Without the guarantee of private property, their profit is a risk. This is important for foreign multinationals considering whether to invest in a developing country. For example, they may fear investing in oil production, if there is a chance that the oil industry could be nationalised and therefore they would lose out.
Property might also be important for dealing with market failure such as the tragedy of the commons.
For example, if there is no ownership of limited water supplies, it may lead to over supply or over fishing which harm the long term economic welfare of the economy.
It is also worth bearing in mind property can create problems in an economy. If
- Property is inequitably distributed. e.g. many rural farmers have no access to land so they can’t grow their own crops.
- Monopoly exploitation of firms/people with property rights.
- Tragedy of the anticommons. E.g. people with patents preventing the use of their inventions.
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Property might also be important for dealing with market failure such as tragedy of the commons.
government should try to correct balance of payment deficit
this websProperty rights are important for giving firms the incentive and confidence to invest. Firms need a profit incentive to invest in buying capital and investing in equipment. Without the guarantee of private property their profit is a risk. This is important for foreign multinationals considering whether to invest in a developing country. For example, they may fear investing in oil production, if there is a chance that the oil industry could be nationalised and therefore they would lose out.
ite should be very complex
Property rights aren’t necessary advantageous for LDC nations. They shouldn’t be force to adopt regulations suited for developed nations. Property rights can constrain a nation access to an assortment products and technologies. Prices of patented goods will increase for a population that barely has sufficient income to purchase essential products. Intellectual property rights may impede access to information favorable for development, e.g. information attained from reverse engineering.
I am not advocating that property rights in general are bad. Instead property rights should be tailored for nations in accordance to their state of development. In some circumstances it is more beneficial for property rights not to be promoted.