Property institutions and business investment on American Indian reservations

Publication Type:
Journal Article
Citation:
Regional Science and Urban Economics, 2014, 46 (1), pp. 116 - 125
Issue Date:
2014-01-01
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We test the hypothesis that property institutions are responsible for the persistent low levels of business and economic development on American Indian reservations. American Indian lands are held in trust by the US Federal government and may not be used as collateral. We exploit the uniform and equal distribution of land between the Agua Caliente tribe and non-Indians in Palm Springs, CA in our analysis. Due to the General Allotment Act of 1887, the land was divided in a checkerboard pattern with even-numbered parcels provided to Agua Caliente government or individual tribal members and odd-numbered parcels (held in fee-simple status) were sold to non-Indians. Because of this, we overcome the usual land quality selection problem between the two types of property institutions. We find that holding local amenities and other characteristics of the parcel constant, there is no difference in the level of business investment on trust and fee simple properties. These results indicate that the inability to use American Indian land as collateral does not drive the low levels of observed business investment; other mechanisms and institutions may be the culprit. © 2014 Elsevier B.V.
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