Interantional Property Rights: The Role of Diversity

Using the International Index of Property Rights, this study explores the relationship between the quality of country level property rights and three measures of diversity: ethnic, linguistic, and religious. Past studies have assumed a linear relationship between various measures of diversity and economic outcomes, including property rights. The assumption of a linear relationship suggests that the estimated effect of diversity on the outcome will be the same for any change in diversity, regardless of the level diversity within the country. It is argued that the effects of diversity can have diminishing marginal effects on the quality of property rights. By relaxing the assumption of linearity, this analysis contributes to the growing literature on property rights. These relationships are explored using a cross-country data set and the results suggest that ethnic diversity has a diminishing, negative effect on the quality of property rights, while linguistic diversity has a diminishing, positive effect.