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Government Restrictions for Land and Permits: Firm-Level Evidence on Obstacles to Economic Development in Transition Countries

Misallocation of land resources can be a substantial hindrance to economic development in a developing or transition economy. If access to land resources is limited by the government or if the ability to gain appropriate permits to use the land is subject to delays, required bribes, or corruption, the efficiency of the land allocation mechanism is hindered and overall economic growth can be limited. In this paper I examine the extent to which limited access to land and the inability to gain permits in a reasonable manner are cited by businesses in transition economies as substantial impediments. Using the 2009 World Bank-EBRD BEEPS data, I empirically model how firm characteristics and country characteristics affect access to land and building permits. Results reveal key factors that affect access to land and the ability to use land with corresponding building permits. Limited access to land is also demonstrated to contribute to increased bribery requests by government officials. Policy recommendations are discussed.