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Capital and growth with oligarchic property rights

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  • 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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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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  1. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(2), pages 503-30, May.
  2. Konstantin Sonin, 2002. "Why the Rich May Favor Poor Protection of Property Rights," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 544, William Davidson Institute at the University of Michigan.
  3. Leonid Polishchuk & Alexei Savvateev, 2004. "Spontaneous (non)emergence of property rights," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 12(1), pages 103-127, 03.
  4. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, American Economic Association, vol. 80(2), pages 92-96, May.
  5. Daron Acemoglu, 2006. "Modeling Inefficient Institutions," NBER Working Papers 11940, National Bureau of Economic Research, Inc.
  6. Daron Acemoglu, 2003. "The Form of Property Rights: Oligarchic vs. Democratic Societies," NBER Working Papers 10037, National Bureau of Economic Research, Inc.
  7. Glaeser, Edward & Scheinkman, Jose & Shleifer, Andrei, 2003. "The injustice of inequality," Journal of Monetary Economics, Elsevier, Elsevier, vol. 50(1), pages 199-222, January.
  8. 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, University of Chicago Press, vol. 100(6), pages 1208-31, December.
  9. Serguey Braguinsky & Roger Myerson, 2007. "A macroeconomic model of Russian transition," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 15(1), pages 77-107, 03.
  10. Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, American Economic Association, vol. 89(1), pages 22-46, March.
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Citations

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Cited by:
  1. Jayasri Dutta & Colin Rowat, 2004. "The Road to Extinction: Commons with Capital Markets," GE, Growth, Math methods, EconWPA 0412001, EconWPA.
  2. Besley, Timothy & Ghatak, Maitreesh, 2010. "Property Rights and Economic Development," Handbook of Development Economics, Elsevier, Elsevier.
  3. Shumilov, Andrei, 2008. "Performance of business groups: Evidence from post-crisis Russia," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 24/2008, Bank of Finland, Institute for Economies in Transition.
  4. 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.
  5. 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.
  6. Manuel Oechslin, 2006. "Creditor Protection and the Dynamics of the Distribution in Oligarchic Societies," IEW - Working Papers, Institute for Empirical Research in Economics - University of Zurich 264, Institute for Empirical Research in Economics - University of Zurich.
  7. Serguey Braguinsky & Roger Myerson, 2007. "A macroeconomic model of Russian transition," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 15(1), pages 77-107, 03.
  8. Serguey Braguinsky, 2009. "Postcommunist Oligarchs in Russia: Quantitative Analysis," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 52(2), pages 307-349, 05.

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