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Incomplete property rights, redistribution, and welfare

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  • J. Amegashie

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Abstract

In a world where the private protection of property is costly, government redistribution can lead to an increase in aggregate output. This result is not new. The novelty of this paper lies in specifying the conditions under which this efficiency-enhancing redistribution improves everyone’s welfare including the welfare of those whose labor finances the redistributive program (i.e., the rich) and how this is affected by the protection of property rights. The state may directly enhance economic rights through investments in security and the protection of property or it may indirectly do so through the redistribution of income. Under certain conditions, redistribution becomes desirable in situations where the state has exhausted its ability to enhance efficiency through the direct enforcement of property rights. In this case, redistribution can make all members of a society better off. Specifically, this occurs when the cost of predation is sufficiently low and the technology of private protection of property rights is sufficiently weak. The adverse effects of redistribution may be the consequence but not the cause of state failure. The real cause is a corrupt and inept state.

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Article provided by Springer in its journal Social Choice and Welfare.

Volume (Year): 30 (2008)
Issue (Month): 4 (May)
Pages: 685-699

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Handle: RePEc:spr:sochwe:v:30:y:2008:i:4:p:685-699

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  1. Dieter Bös & Martin Kolmar, 2000. "Anarchy, Efficiency, and Redistribution," CESifo Working Paper Series 357, CESifo Group Munich.
  2. Daron Acemoglu & James A. Robinson, 2000. "Why Did The West Extend The Franchise? Democracy, Inequality, And Growth In Historical Perspective," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1167-1199, November.
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  9. Allen, Douglas W, 2002. "The Rhino's Horn: Incomplete Property Rights and the Optimal Value of an Asset," The Journal of Legal Studies, University of Chicago Press, vol. 31(2), pages S339-58, June.
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  13. Harms, Philipp & Zink, Stefan, 2003. "Limits to redistribution in a democracy: a survey," European Journal of Political Economy, Elsevier, vol. 19(4), pages 651-668, November.
  14. Usher, D, 1987. "Theft as a Paradigm for Departures from Efficiency," Oxford Economic Papers, Oxford University Press, vol. 39(2), pages 235-52, June.
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  16. Palda, Filip, 1999. " Property Rights vs. Redistribution: Which Path to National Wealth?," Public Choice, Springer, vol. 101(1-2), pages 129-45, October.
  17. Kanbur, Ravi, 2000. "Income distribution and development," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 13, pages 791-841 Elsevier.
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Cited by:
  1. J. Atsu Amegashie, 2009. "Incomplete Property Rights and Overinvestment," CESifo Working Paper Series 2711, CESifo Group Munich.
  2. Amegashie, J. Atsu, 2013. "Consumers' Complaints, the Nature of Corruption, and Social Welfare," MPRA Paper 47215, University Library of Munich, Germany.

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