A Theory of Ambiguous Property Rights in Transition Economies: The Case of the Chinese Non-State Sector

Abstract

Can ambiguous property rights sometimes be efficient? Ambiguous property rights arise when owners' rights are not guaranteed beforehand. Instead, owners have to fight for actual control, ex post. We show that China's highly successful non-state sector is a major example of ambiguous property rights. We then propose a theory of ambiguous property rights, which argues that ambiguous property rights arise due to an imperfect market environment. We argue that the immature market environment in China makes ambiguous property rights often more efficient than unambiguously defined private property rights.

A curious case of property privatization: two examples of the tragedy of the anticommons in Ho Chi Minh City-Vietnam

“…Unlike Heller's approach, Li (1996) argued that a partnership with the authority in a development project could resolve a tragedy of the anticommons, although this will increase the ambiguity of property rights.…”

“…Bagdai & Tsolmon, 2009). Under ambiguous property rights, the owner's control over his/her resource is not guaranteed; that is, pre-agreed and binding rules regarding who will be in control in various ex post contingencies are absent (Li, 1996). As shown by Bagdai, van der Molen, and Tuladhar (2012) in the case of Russia, the restrictions for individuals to use the land are aggravated by the lack of access to land information and inefficient land administration systems.…”

“…As shown by Bagdai, van der Molen, and Tuladhar (2012) in the case of Russia, the restrictions for individuals to use the land are aggravated by the lack of access to land information and inefficient land administration systems. Li (1996) and Jieming (2002) have observed problems with ambiguous property rights in China, while (Loehr, 2012a(Loehr, , 2012b refers to the same phenomenon in Cambodia. Li (1996) argues that ambiguous property rights lead to high transaction costs and increased uncertainties in the market place.…”

“…Li (1996) and Jieming (2002) have observed problems with ambiguous property rights in China, while (Loehr, 2012a(Loehr, , 2012b refers to the same phenomenon in Cambodia. Li (1996) argues that ambiguous property rights lead to high transaction costs and increased uncertainties in the market place. Interestingly, however, Jieming (2002) and Li (1996) also show that despite the ambiguity of property rights, the private sector -particularly in China -can still be successful.…”

“…Li (1996) argues that ambiguous property rights lead to high transaction costs and increased uncertainties in the market place. Interestingly, however, Jieming (2002) and Li (1996) also show that despite the ambiguity of property rights, the private sector -particularly in China -can still be successful. Apparently, the ambiguous allocation of property rights over urban land has created opportunities in the development process for various actors who have been able to capture resources that have been left in the public domain.…”