Property Rights without Transfer Rights: A Study of Indian Land Allotment

Abstract

Governments often place restrictions on the transferability of property rights to protect property owners from making "mistakes" such as selling their property under value. However, these restrictions entail costs: they reduce the property's value as collateral in credit markets, limit owners' ability and incentives to invest in the land, and create various transaction costs that constrain optimal land use. We investigate these costs over the long run, using a natural experiment whereby millions of acres of reservation lands were allotted to Native American households under differing land-titles between 1887-1934. We compare non-transferable land plots to neighboring plots held with full property rights, using fine-grained satellite imagery to study differences in land development and agricultural activity from 1974-today.

The chronic uncertainty of American Indian property rights

“…Recent economics scholarship has identified the persistent consequences of institutional choices (Bleakley and Lin, 2012), including on American Indian reservations (Dippel et al ., 2020). Beyond the path dependent consequences of institutional choices during specific formative periods, the long-run scalar benefits of impersonal institutions can only be realized through their provenance of intertemporal certainty (Broadberry and Wallis, 2017).…”

“…Interestingly, reservation land that was successfully privatized, and reservation land that was never subject to allotment (i.e. tribal land) both outperformed land that was partially subject to treatment under the trusteeship scheme (Dippel et al ., 2020).…”

“…2 Such optimism must be at least partially qualified by consideration of the fact that continued federal restrictions on definition and enforcement of property institutions reduces tribal wealth. A recent analysis of differences between privately held (fee simple), tribally held, and trust land (property technically owned by the government) found that government control was observably worse for economic development than tribal or fee simple control of property, with private property slightly outperforming tribal control (Dippel et al, 2020). But given that outcomes on reservations that received the greatest share of privatized lands are still considerably poorer than regional or national averages, this directly indicates that specific differences in property institutions are at most part of the answer to why reservations remain chronically underdeveloped.…”

Political Divide, Weak Property Rights, and Infrastructure Provision: An Empirical Examination of Takings Decisions in Jerusalem

“…This is due to two related reasons: Firstly, the political and judicial limitations on abuse of power are weaker where there is ambiguity concerning the residual claimant of the land. Secondly, the value of nonformalized land is lower due to limited transferability and smaller investments therein (Dippel and Frye 2020). As a result, nonformalized land is more seizable by the state (Vahabi 2016).…”

Indigenous Nations and the Development of the U.S. Economy: Land, Resources, and Dispossession

“…11On the Dawes Act, see Akee (2020), Carlson (1978, 1981, 1983), Miller (2015), Dippel and Frye (2021), Dippel, Frye, and Leonard (2020), and Leonard, Parker, and Anderson (2020). Exceptions include Wishart (1995), Gregg (2009), and Gregg and Wishart (2012) on the Cherokee economy and their removal.…”