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Sovereignty, Credible Commitments, and Economic Prosperity on American Indian Reservations

  • Terry Anderson,
  • Dominic Parker
  • Update:

    The Fraser Institute, Canada’s leading public policy think-tank has awarded this paper the 2011 Addington Prize for Measurement, which comes with a $10,000 prize. The paper measures the crippling economic consequences resulting from the lack of private property rights on Indian Reservations. The entries were judged for originality and significance of the ideas presented, persuasiveness of the argument, and integrity of the data.


    By Terry L. Anderson and Dominic P. Parker


    American Indian reservations are islands of poverty in a sea of wealth. Because this poverty cannot be explained solely by natural resource, physical, and human capital constraints, institutions are likely to be part of the explanation. One of the institutional variables is the sovereign power of tribes, which allows tribal governments to act opportunistically. The potential for such opportunistic behavior can thwart economic development if tribes are unable to make credible commitments to stable contract enforcement. One avenue for credible commitments is Public Law 280, which required some tribes to turn judicial jurisdiction over civil disputes to the states in which they reside. Using data for 1969-99, we find that per capita income for American Indians on reservations subject to state jurisdiction grew significantly more than it did for Indians who were not.

    Journal of Law and Economics, vol. 51,
    November 2008, pp. 641-666
    The University of Chicago. All rights reserved.
    0022-22186/2008/5104-0024 $10.00

    Written By
    • Terry Anderson

      Terry L. Anderson is the former president and executive director of PERC, and the John and Jean De Nault Senior Fellow at the Hoover Institution, Stanford University.

    • Dominic Parker
      Dominic Parker
      • Senior Fellow

      Dominic (Nick) Parker, is a PERC senior fellow as well as director of PERC’s summer fellowship program. Nick is also a professor of applied economics at the University of Wisconsin-Madison where he serves in editorial roles for three leading academic journals in environmental and resource economics.

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