To capture the political view of property rights, we use variables from the Polity IV dataset, averaged over the period 1995-99 and Beck et al. (1999)’s Database of Political Institutions (DPI). The variables, **Democracy** and **Autocracy** , scored from 0-10 (0 = low; 10 = high) reflect the general openness (closed-ness) of the political institutions in the country respectively and are from the Polity IV Dataset<sup>28</sup> . **Checks** from DPI, measures the number of influential veto players in legislative and executive initiatives. The political view predicts that greater competition and more checks and balances will limit the ability of the elite to dictate policy and institutional development.<sup>29</sup> Rajan and Zingales (2003) argue that trade openness proxies for the extent to which certain established interests can restrict entry into their country’s markets. According to this view, one would expect property rights to be better protected in countries that are more open to international trade. As a measure of openness of the country, we use **Trade** which is the extent of trade as a percentage of GDP of the country. The variable is taken from the World Development Indicators and averaged over the period 1995-99. Trade as a percentage of GDP is a potentially endogenous variable since a country’s actual openness depends on investor rights. An alternative to this variable is the **Frankel and Romer** (1999) measure of natural openness that is based only on geographic characteristics. We present results with both Trade/GDP and the Frankel and Romer (1999) measure though the latter is available for only 63 of the 80

> 28 According to the Polity IV Dataset, the structure of the state is determined by broadly three interdependent elements - presence of institutions and procedures through which citizens can express effective preferences about alternative policies and leaders, the existence of institutionalized constraints on the exercise of power by the executive and the guarantee of civil liberties to all citizens in their daily lives and in acts of political participation. Other aspects of democracy such as rule of law, freedom of the press and so on are regarded as specific manifestations of these general principles. The Democracy indicator is derived from coding of the competitiveness of political participation, the openness and competitiveness of executive recruitment and constraints on the chief executive. Polity IV also has a composite 11 point scale for Autocracy since many polities exhibit mixed qualities of both of these distinct authority patterns. The Autocracy score is derived from coding of the competitiveness of political participation, the regulation of participation, the openness and competitiveness of executive recruitment, and constraints on the chief executive.

> 29 In unreported tables we also used the Legislative and Executive Indices of Electoral Competiveness (LIEC/EIEC) from DPI as alternative indices in place of Democracy and Autocracy. LIEC/EIEC are narrower measures that focus specifically on the competitiveness of elections, whereas Democracy and Autocracy are more general measures of the openness (closedness) of the political system that include electoral competitiveness as one aspect. LIEC/EIEC explain a smaller proportion of property rights variation than Democracy and Autocracy.

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