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Property rights, trust, and economic performance

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  • Teraji, Shinji

Abstract

This article develops a model of how property rights can emerge in the absence of political institutions of enforcement. It analyzes an alternative security mechanism in the community. Individual agents commit themselves to protect property rights. Trust is a cognitive state that one will not be exploited by another. The model presents a behavioral economic framework, in which work effort varies. It is shown that trust is a crucial factor for producing high economic outcomes. The establishment of trust depends on shared mental models. Two equilibrium solutions can exist: one, with a full protection of property rights and a high level of trust, and another, with no protection of property rights and a low level of trust.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics).

Volume (Year): 37 (2008)
Issue (Month): 4 (August)
Pages: 1584-1596

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Handle: RePEc:eee:soceco:v:37:y:2008:i:4:p:1584-1596

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Web page: http://www.elsevier.com/locate/inca/620175

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References

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  1. Herschel I. Grossman, 2000. "The Creation of Effective Property Rights," NBER Working Papers 7897, National Bureau of Economic Research, Inc.
  2. Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, vol. 103(3), pages 441-63, August.
  3. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  4. Teraji, Shinji, 2003. "Herd behavior and the quality of opinions," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 32(6), pages 661-673, December.
  5. Altman, Morris, 2001. "Culture, human agency, and economic theory: culture as a determinant of material welfare," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 30(5), pages 379-391.
  6. Grossman, Herschel I & Kim, Minseong, 1995. "Swords or Plowshares? A Theory of the Security of Claims to Property," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1275-88, December.
  7. Samuel Bowles & Herbert Gintis, 2001. "Social Capital and Community Governance," Working Papers 01-01-003, Santa Fe Institute.
  8. Sugden, Robert, 1989. "Spontaneous Order," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 85-97, Fall.
  9. M Weitzman & Cheng-Gang Xu, 1993. "Chinese township village enterprises as vaguely defined cooperations," LSE Research Online Documents on Economics 3754, London School of Economics and Political Science, LSE Library.
  10. Hirshleifer, Jack, 1995. "Anarchy and Its Breakdown," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 26-52, February.
  11. Denzau, Arthur T & North, Douglass C, 1994. "Shared Mental Models: Ideologies and Institutions," Kyklos, Wiley Blackwell, vol. 47(1), pages 3-31.
  12. Teraji, Shinji, 2007. "Morale and the evolution of norms," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 36(1), pages 48-57, February.
  13. A. Muthoo, 2002. "A Model of the Origins of Basic Property Rights," Economics Discussion Papers 546, University of Essex, Department of Economics.
  14. Elinor Ostrom, 2000. "Collective Action and the Evolution of Social Norms," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 137-158, Summer.
  15. Douglass C. North, 2005. "Introduction to Understanding the Process of Economic Change
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  16. Matthew J. Baker, 2003. "An Equilibrium Conflict Model of Land Tenure in Hunter-Gatherer Societies," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 124-173, February.
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Cited by:
  1. Bezabih, Mintewab & Kohlin, Gunnar & Mannberg, Andrea, 2011. "Trust, tenure insecurity, and land certification in rural Ethiopia," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(6), pages 833-843.
  2. Teraji, Shinji, 2009. "A model of corporate social performance: Social satisfaction and moral conduct," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(6), pages 926-934, December.

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