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Markets and jungles

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  • Thomas Gall

    ()

  • Paolo Masella

    ()

Abstract

Institutions affect prospects for economic growth and development. In this paper a condition on the primitives determines whether an economy supports markets. Agents differ in land holdings, skill, and power. A competitive market assigns land efficiently to the skilled, not necessarily to the powerful. Therefore a market allocation needs to be stable with respect to coalitional expropriation. More equally distributed power and higher congruence of land and power favor stable markets. In a dynamic setting, we identify conditions that ascertain whether markets are stable forever, or alternate with expropriation in a limit cycle, decreasing efficiency and amplifying macroeconomic fluctuations.

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Bibliographic Info

Article provided by Springer in its journal Journal of Economic Growth.

Volume (Year): 17 (2012)
Issue (Month): 2 (June)
Pages: 103-141

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Handle: RePEc:kap:jecgro:v:17:y:2012:i:2:p:103-141

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Web page: http://www.springerlink.com/link.asp?id=102931

Related research

Keywords: Expropriation; Market institutions; Inequality; Growth; Fluctuations; Coalition formation; E02; O43; C71;

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Cited by:
  1. Falkinger, Josef & Grossmann, Volker, 2013. "Oligarchic land ownership, entrepreneurship, and economic development," Journal of Development Economics, Elsevier, vol. 101(C), pages 206-215.

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