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Insecure Property Rights and Growth: The Roles of Appropriation Costs, Wealth Effects, and Heterogeneity

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  • Ngo Van Long
  • Gerhard Sorger

Abstract

We extend the model of insecure property rights by Tornell and Velasco (1992) and Tornell and Lane (1999) by adding three features: (i) extracting the common property asset involves a private appropriation cost, (ii) agents derive utility from wealth as well as from consumption, and (iii) agents can be heterogeneous. We show that both an increase in the appropriation cost and, when appropriation costs vary across agents, an increase in the degree of heterogeneity of these costs reduce the growth rate of the public capital stock. We also show that, in the interior equilibrium, the private asset can have either a lower or a higher money rate of return than the common property asset.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1253.

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Date of creation: 2004
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Handle: RePEc:ces:ceswps:_1253

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Related research

Keywords: corruption; property rights; growth; appropriation cost;

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  1. Jayasri Dutta & Colin Rowat, 2006. "The Road to Extinction: commons with capital markets," Discussion Papers 04-11r, Department of Economics, University of Birmingham.
  2. Holger Strulik & Ines Lindner, 1999. "Why not Africa? -- Growth and Welfare Effects of Secure Property Rights," Quantitative Macroeconomics Working Papers 19909, Hamburg University, Department of Economics.
  3. Gaudet, G. & Moreaux, M. & Salant, S.W., 1997. "Private Storage of Common Property," Papers 97-08, Michigan - Center for Research on Economic & Social Theory.
  4. Cole, Harold L & Mailath, George J & Postlewaite, Andrew, 1992. "Social Norms, Savings Behavior, and Growth," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1092-1125, December.
  5. Gerhard Sorger, 2005. "A dynamic common property resource problem with amenity value and extraction costs," International Journal of Economic Theory, The International Society for Economic Theory, vol. 1(1), pages 3-19.
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