Turning cheap talk into economic growth: On the relationship between property rights and judicial independence

► De jure property rights do not induce economic growth per se. ► An independent judiciary can be a tool to make their enforcement credible. ► If enforced by an independent judiciary, property rights do induce economic growth. Among economists, the view that precisely defined and reliably enforced property rights are generally conducive to economic growth has been quasi-unanimous. But recently, some authors have argued that the relationship is more complex than previously acknowledged: property rights reforms might, for example, not per se lead to increases in observed growth rates. This paper contributes to the debate by emphasizing that the mere promise of secure property rights is unlikely to have any effects unless accompanied by some commitment to enforce these rights that is perceived as credible by private actors. An independent judiciary is interpreted as a tool that permits governments to make credible commitments to abide by the law. We provide empirical evidence for a positive growth effect of constitutional property rights, once the judicial system is independent enough to guarantee their enforcement.