The long term effects of property rights and institutional ownership on regional development

May, 2015 to October, 2017
University of Southampton

The research analyses the impact of two 18th-century institutions, land ownership and serfdom, on regional economic development in Hungary in the medium (early 20th century) and long (contemporary) term. The first hypothesis is that different types of ownership (by families, the Church and the State) induced different incentives to extract rents from the peasantry and to provide public goods like schooling. The second hypothesis is that serfdom, in its various degrees, is likely to hamper entrepreneurial abilities and these can be transmitted across generations. This project identifies whether these fundamental institutions have led to different paths of regional growth.

 Institutions are of crucial importance for development and there is a growing awareness that their impact can be very long lasting. In this project we look at the economic legacy of two fundamental institutions: land ownership and serfdom. Land was arguably the most important capital good in the preindustrial age and land ownership can have a profound impact on inequality and growth. Serfdom has been hypothesised to be one fundamental cause of the gap in prosperity between Western and Eastern Europe, as serfdom was more widespread and prolonged in the East.

We look at the effects that these institutions in 18th-century Hungary have had on economic development in the early 20th century and in the early 21st century. The advantage of studying historical Hungary (including parts of modern Romania and Slovakia) is that, as part of the Habsburg Empire, it operated excellent statistical services, compiling detailed and accurate data at even the lowest administrative levels. A further advantage is that State and Church ownership of land was widespread and a significant fraction of peasants were not under serfdom. Moreover, those who were experienced different degrees of bondage. Both institutional ownership and villages under serfdom were rather scattered in the territory, thus creating an excellent laboratory for analysing their effects.  

The project will develop a village-level dataset on the property rights from the 18th century, linked to contemporary data on regional development.  Based on these data, it will produce several paper on the institutional roots of economic development, which will be submitted to peer-reviewed economic journal.  CEU will benefit both from the data (which will be made available to the reserch community) and also from the new scientific papers written by CEU reserchers.