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Capital and growth with oligarchic property rights

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Author Info

  • Serguey Braguinsky

    (SUNY Buffalo)

  • Roger Myerson

    (University of Chicago)

Abstract

To analyze effects of imperfect property rights on economic growth, we consider economies where some fraction of capital can be owned only by local oligarchs, whose status is subject to political risk. Political risk decreases local capital and wages. Risk-averse oligarchs acquire safe foreign assets for insurance, thus increasing wages in other countries that protect outside investors. We show that for empirically reasonable parameter values, reforms to decrease political risk or to protect more outsiders' investments can decrease local oligarchs' welfare by increasing wages, making such reforms prone to political resistance from the ruling elite. We suggest measures of property rights imperfections derived from empirically observable data, and we test the quantitative predictions of our model using those measures and other parameter values routinely assumed in growth theory. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2007.02.006
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 10 (2007)
Issue (Month): 4 (October)
Pages: 676-704

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Handle: RePEc:red:issued:06-195

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Related research

Keywords: Oligarchs; Political risk; Growth; Capital; Imperfect property rights;

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References

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  1. Daron Acemoglu, 2003. "The Form of Property Rights: Oligarchic vs. Democratic Societies," NBER Working Papers 10037, National Bureau of Economic Research, Inc.
  2. Tornell, Aaron & Velasco, Andes, 1992. "The Tragedy of the Commons and Economic Growth: Why Does Capital Flow from Poor to Rich Countries?," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1208-31, December.
  3. Serguey Braguinsky & Roger Myerson, 2007. "A macroeconomic model of Russian transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 15(1), pages 77-107, 03.
  4. Sonin, Konstantin, 2003. "Why the rich may favor poor protection of property rights," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 715-731, December.
  5. Daron Acemoglu, 2006. "Modeling Inefficient Institutions," NBER Working Papers 11940, National Bureau of Economic Research, Inc.
  6. Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
  7. Edward L. Glaeser & Andrei Shleifer, 2002. "The Injustice of Inequality," NBER Working Papers 9150, National Bureau of Economic Research, Inc.
  8. Serguey Braguinsky & Roger Myerson, 2007. "Capital and growth with oligarchic property rights," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(4), pages 676-704, October.
  9. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1990. "The Allocation of Talent: Implicationsfor Growth," University of Chicago - George G. Stigler Center for Study of Economy and State 65, Chicago - Center for Study of Economy and State.
  10. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
  11. Leonid Polishchuk & Alexei Savvateev, 2004. "Spontaneous (non)emergence of property rights," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(1), pages 103-127, 03.
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Citations

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Cited by:
  1. Serguey Braguinsky, 2009. "Postcommunist Oligarchs in Russia: Quantitative Analysis," Journal of Law and Economics, University of Chicago Press, vol. 52(2), pages 307-349, 05.
  2. Serguey Braguinsky & Roger Myerson, 2007. "Capital and growth with oligarchic property rights," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(4), pages 676-704, October.
  3. Gehlbach, Scott & Keefer, Philip, 2011. "Investment without democracy: Ruling-party institutionalization and credible commitment in autocracies," Journal of Comparative Economics, Elsevier, vol. 39(2), pages 123-139, June.
  4. Timothy Besley & Maitreesh Ghatak, 2009. "Property rights and economic development," LSE Research Online Documents on Economics 25428, London School of Economics and Political Science, LSE Library.
  5. Manuel Oechslin, 2009. "Creditor protection and the dynamics of the distribution in oligarchic societies," Journal of Economic Growth, Springer, vol. 14(4), pages 313-344, December.
  6. Jayasri Dutta & Colin Rowat, 2007. "The Road to Extinction: Commons with Capital Markets," Discussion Papers 04-11RR, Department of Economics, University of Birmingham.
  7. Serguey Braguinsky & Sergey V. Mityakov, 2012. "Foreign Corporations and the Culture of Transparency: Evidence from Russian Administrative Data," NBER Working Papers 17731, National Bureau of Economic Research, Inc.
  8. Serguey Braguinsky & Roger Myerson, 2007. "A macroeconomic model of Russian transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 15(1), pages 77-107, 03.
  9. Shumilov, Andrei, 2008. "Performance of business groups: Evidence from post-crisis Russia," BOFIT Discussion Papers 24/2008, Bank of Finland, Institute for Economies in Transition.

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