The effects of insecure property rights on investment and economic *growth in sub-Saharan-African countries

Sub-Saharan Africa has been perceived as a very high-risk place for investment for diverse reasons, including incredible rules, systemic corruption, political instability and social unrest, lack of formal mechanism of contract enforcement and insecure property rights. Because of this perception, investors are reluctant to commit capital. Our case-studies in Mali and Burkina Faso, suggest that these beliefs are well-founded; the lack of contract discipline is real. Firms and businessmen prefer to rely on mechanisms of commercial enforcement based on personal recommendations, repeated interactions as they lack confidence in the legal system and the effectiveness of the judiciary. In the empirical cross-country analysis section, we attempt to build some link between this lack of formal mechanism of contract enforcement (or secure property rights) and investment and economic growth.;The empirical section investigates the general proposition that insecure property rights lower growth by limiting capital accumulation. Variables that capture political violence and secure property right are introduced in the framework popularized by Barro and Sala-I-Martin for cross-country growth analysis to shed light on these relationships. Evidence from 48 Sub-Saharan African countries does not bring any support to our first claim that insecure property rights deter investment. However, the cross-country growth analysis shows a significant negative relationship between Gastil index and growth. In this study, Gastil index measures political freedom and civil liberties in a given country. The higher this index, the lower political freedom and civil liberties for the country. This negative relationship between Gastil index and growth confirms our hypothesis that insecure property rights reduce growth.