De Soto's theory of property rights

De Soto's theory of property rights emphasizes that clearly defined and legally recognized ownership rights are fundamental for economic development. When individuals and businesses can securely own, transfer, and use property—such as land or capital—they have the confidence to invest and innovate. Conversely, poorly defined or insecure property rights discourage investment, render assets unusable, and perpetuate poverty. De Soto argues that formal property rights create a foundation for economic activity, enable access to credit, and reduce corruption, thus unlocking the productive potential of assets held informally or illegally in developing countries.