Government Partisanship and Property Rights: Cross-Country Firm-Level Evidence

Property rights are essential to economic development but vary with the political environment. We develop and test the claim that government partisanship influences the security of business firms' property rights: the perceived security of property rights increases when right-wing parties take power and declines with the election of left-leaning parties. Unlike research that uses country-level aggregates to draw inferences about the determinants of secure property rights, we analyze survey responses of over 7,400 firm owners from 73 countries using a novel difference-in-differences approach. We find that the political partisanship of the government in power strongly affects individual perceptions of property rights: firm owners are more likely to perceive that their property rights are secure under right-leaning governments. Our results are robust to firm- and country-level economic performance as well as controls for political institutions that might induce more stability to property rights, such as the number of checks and balances (veto players) in a system. Overall, our results indicate that business owners' beliefs about the security of property rights are highly responsive to changes in government partisanship.