Property rights regime in land development – Analysis of the influence of institutions on land development in terms of the property rights theory

Abstract

In the current institutional models, land development is primarily viewed as a process of social interaction in which informal institutional structures, strategies and personal characteristics of agents are influential. The institutional-economic models of land development emphasise the roles of uncertainty, incomplete information or transaction costs. Just recently, attention started to be paid to the formal ‘rules of the game’ and the property rights regime in land development processes. The purpose of this study is to increase knowledge on the role of the property rights regime in land development and contribute to the further conceptualisation of the impact of the institutions on land development. This study addresses the question of what constitutes the elements of the property rights regime in land development and how the differences in the property rights regime can explain differences in the land development processes. In order to achieve the aim of this study, the analytical model of land development based on the property rights approach is proposed and a comparative analysis on the influence of the property rights regime on land development methods in two countries is conducted. The research approach in this study is a mixture of some key characteristics of qualitative and comparative approaches. In the analytical model developed in this study, the distribution of ‘rights’ in the property rights regime in land development is the central concept. Within the property rights regime the explanatory variables were identified, which are important characteristics of the property rights regimes. The explanatory variables are: the position of the municipality in the development process, the flexibility versus certainty in development control, and the economic right in land development. The delineation and allocation of rights in connection to the explanatory variables were investigated in comparative research in two countries. Furthermore, the distribution of rights within the property rights regime was discussed in relation to the methods of land development. The empirical research shows how institutions affect the market processes.