Do better property rights improve local income?: Evidence from First Nations' treaties

This paper examines the effect of an improvement in property rights on a local economy using the case of First Nations' modern treaties. These treaties are an important institutional reform that clarifies ownership of land and natural resources near Aboriginal communities. Using confidential micro-data, I find evidence of a positive impact of modern treaties on real income. The effect is driven by employment income and spreads across workers in industries not directly affected by the reform. I also find an increase in real wages and housing costs. The effects are similar in neighboring communities outside Indian reserves. These results are consistent with property right reforms creating a positive demand shock that affects the whole local economy. This is a yet understudied mechanism through which better property rights can generate positive local spillovers. (C) 2015 Elsevier B.V. All rights reserved.