Institutional Interfaces and Actors’ Behavior in Transitional Real Estate Markets of Addis Ababa (Ethiopia)

Abstract

With the collapse of communism in the early 1990s which heralded the transition from centrally planned economy to free market economy, the issues of property rights and the role of institutions in development have become of paramount importance. However, compared to the transitional economies of East European communist countries, the case of the transition of former socialist oriented developing countries like Ethiopia has been given less attention than it deserves. This research compares two views regarding transition of such developing countries: one by De Soto (1989, 2000) liberal market consensus view based on ‘secure, reliable property rights’ through the hidden revolution of informality; and the other by Khan (2002, 2003) social transformation view or developmental state approach which revokes the ‘stable property rights’ motto and upholds the necessity of making massive interventions in reallocation of property rights by dynamic states in the interest of growth and creating dynamic capitalist classes while destroying property rights of unproductive groups. Rather than opting for a prescriptive espousal, this research endeavours to investigate what real circumstances on the ground indicate. The main research question is how the formal and informal institutions interface and influence actors’ behaviour in the transitional real estate markets of Addis Ababa.