How important are property rights?

It is a bit of a truism that property rights are key to economic development. An efficient system, runs the logic, needs to be transparent, transferable, excludable, and enforceable. In a bit more detail:

1. Transparent means that it is cheap and easy to find out who owns what.
2. Transferable means that it is cheap and easy to sell or transfer property rights from one entity to another.
3. Excludable means that if you own the rights to a piece of property, then the law allows you to exclude others from enjoying those rights.
4. Enforceable means what it says.

Without those characteristics, runs the logic, you get underinvestment and confusion and commons-tragedies and all that. And the logic has some empirical backing. For example, in 1986 the Buenos Aires provincial government offered a group of landowners compensation for land that had been seized by a group of squatters. Some landowners took the offer, and the province then transferred title to the squatters. Others did not. On the assumption that the squatters had no way to know whether the landowner from whom they had seized the land would take the provincial offer, Sebastian Galiani and Ernesto Schargrodsky found that the squatters who received titles invested more in their homes and the education of their children.

Here comes the New York Times with an article about terrible land titles in Greece:

“In this age of satellite imagery, digital records and the instantaneous exchange of information, most of Greece’s land transaction records are still handwritten in ledgers, logged in by last names. No lot numbers. No clarity on boundaries or zoning. No obvious way to tell whether two people, or 10, have registered ownership of the same property.”

The article goes on to say that even the former Yugoslav states have better land rights.

One reasonable conclusion would be that bad property rights are a drag on economic recovery. “Many experts cite the lack of a proper land registry as one of the biggest impediments to progress. It scares off foreign investors; makes it hard for the state to privatize its assets, as it has promised to do in exchange for bailout money; and makes it virtually impossible to collect property taxes.”

But another reasonable conclusion would be that the evidence about the importance of clear property rights is wrong ... or at least oversimplified.

There is no getting around that fact that Greece became a rich country despite terrible property rights. The above chart tracks GDP per worker in 2005 dollars (adjusted for purchasing power) for four countries from 1950 to 2011. (The data through 2010 is from the Penn World Tables 7.1; the 2011 data comes from the OECD.) In 1950, Greek workers produced as much as Colombian ones; they were significantly less productive than in Mexico. Over the next three decades, Greece far outdistanced its Latin American counterparts. The current depression has not eliminated that gap.

Greece, of course, had many advantages that Colombia and Mexico did not, but poor property rights did not stop the country from taking advantage of them.

It has to make you wonder. Despite the micro evidence from places like Argentina, are efficient property rights really as important as we think they are?