CDDRL Working Papers
Theorists of new institutional economics are often accused of treating formal property rights institutions as a silver bullet for solving problems of economic growth, political development, and particular cultures' successes. Yet the establishment of rights to property does not guarantee control over property. The relationship between formal property rights and economic development is unclear when legal rights to property are distinct from the informal capacity to control property. I consider formal institutions to be a set of rules with legal enforcement. In contrast, informal institutions rely on social norms to enforce rules, which are often framed as codes of behavior. Formal and informal institutions usually coexist in a given state, with informal institutions and formal institutions acting as complements. Informal institutions coordinate interests, whereas formal institutions enforce decisions. I examine the relationship between formal and informal institutions in the context of rights to a highly valued resource: land rights in rural North India.