The Impact of Property Rights Imperfections on Resource Allocation: Co-Ownership of Land in Bulgaria
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This paper analyzes how imperfections of property rights affect allocation of assets
and welfare, using micro-survey data from Bulgaria. Co-ownership of assets is
widespread in many countries due to inheritance. Central and Eastern Europe offers
an interesting natural experiment to assess the effects of such rights imperfections
because of the asset restitution process in the 1990s. Bulgaria is particularly
interesting because of the prominence of the co-ownership problem (about half of all
land plots are co-owned), because of the strong fragmentation of land, and because of
legislation providing an instrument to separate out chosen (endogenous) versus forced
(exogenous) forms of co-ownership. We find that land in co-ownership is much more
likely to be used by less efficient farm organizations or to be left abandoned, and that
it leads to significant welfare losses.