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A Theory of Inalienable Property Rights

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Why do democratic societies often impose legal restrictions that render various assets or entitlements inalienable, thereby limiting the disposable property rights of individuals? The explanation proposed here is that these constraints arise as an institutional response against private debt markets that, in a sense, work `too well'. That is, I demonstrate how a well-functioning financial market can potentially work against a social policy designed to ensure a basic minimum standard of living for all types of individuals. Inalienable property rights and debt constraints emerge as a natural institutional response to the relatively improvident tendencies of some members of society when a majority of individuals share a common distaste for neighborhood squalor. Pourquoi les sociétés démocratiques imposent-elles souvent des restrictions légales limitant les droits ou actifs transférables des individus? L'explication proposée ici est que ces contraintes apparaissent comme une réponse institutionnelle contre des marchés privés des dettes qui, dans un certain sens, fonctionnent `trop bien'. En effet, je démontre comment un marché financier fonctionnant bien peut aller à l'encontre d'une politique sociale sensée assurer un niveau de vie de base minimum pour toutes les catégories d'individus. Des droits de propriété inaliénables et des contraintes sur les dettes émergent comme des réponses institutionnelles naturelles au manque de prévoyance de certains membres de la société lorsqu'une majorité des individus partage un dégoût commun pour la misère avoisinante.

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Paper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number 110.

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Length: 20 pages
Date of creation: Apr 2000
Date of revision:
Handle: RePEc:cre:crefwp:110

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  1. Oliver Hart & John Moore, 1991. "A Theory of Debt Based on the Inalienability of Human Capital," STICERD - Theoretical Economics Paper Series /1991/233, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  2. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  3. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
  4. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
  5. Timothy J Kehoe & David K Levine, 1993. "Debt Constrained Asset Markets," Levine's Working Paper Archive 1276, David K. Levine.
  6. George J. Stigler, 1967. "Imperfections in the Capital Market," Journal of Political Economy, University of Chicago Press, vol. 75, pages 287.
  7. Fay, S. & Hurst, E. & White, M.J., 1998. "The Bankruptcy Decision: Does Stigma Matter?," Papers 98-01, Michigan - Center for Research on Economic & Social Theory.
  8. Blackorby, Charles & Donaldson, David, 1988. "Cash versus Kind, Self-selection, and Efficient Transfers," American Economic Review, American Economic Association, vol. 78(4), pages 691-700, September.
  9. Jaffee, Dwight M & Russell, Thomas, 1976. "Imperfect Information, Uncertainty, and Credit Rationing," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 651-66, November.
  10. Bergstrom, Theodore C, 1999. " Systems of Benevolent Utility Functions," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(1), pages 71-100.
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Cited by:
  1. Jeremy Lise, 2011. "On-the-Job Search and Precautionary Savings: Theory and Empirics of Earnings and Wealth Inequality," IFS Working Papers W11/16, Institute for Fiscal Studies.
  2. Sorger, Gerhard & Stark, Oded, 2013. "Income redistribution going awry: The reversal power of the concern for relative deprivation," Journal of Economic Behavior & Organization, Elsevier, vol. 86(C), pages 1-9.
  3. Kartik B. Athreya & Xuan S. Tam & Eric R. Young, 2009. "Are harsh penalties for default really better?," Working Paper 09-11, Federal Reserve Bank of Richmond.
  4. J. Amegashie & Bazoumana Ouattara & Eric Strobl, 2013. "Moral hazard and the composition of transfers: theory and evidence from cross-border transfers," Economics of Governance, Springer, vol. 14(3), pages 279-301, August.
  5. Stark, Oded, 2006. "Inequality and migration: A behavioral link," Economics Letters, Elsevier, vol. 91(1), pages 146-152, April.
  6. World Bank, 2007. "India : Land Policies for Growth and Poverty Reduction," World Bank Publications, The World Bank, number 15791, October.
  7. World Bank, 2007. "India - Land Policies for Growth and Poverty Reduction," World Bank Other Operational Studies 7818, The World Bank.
  8. Stark, Oded, 2013. "Stressful Integration," European Economic Review, Elsevier, vol. 63(C), pages 1-9.
  9. Dilip Mookherjee, 2005. "Decentralization, Hierarchies and Incentives: A Mechanism Design Perspective," Boston University - Department of Economics - Working Papers Series WP2005-034, Boston University - Department of Economics, revised Sep 2005.
  10. J. Atsu Amegashie, 2009. "Third-Party Intervention in Conflicts and the Indirect Samaritan's Dilemma," CESifo Working Paper Series 2695, CESifo Group Munich.
  11. Mookherjee, Dilip & von Lilienfeld-Toal, Ulf, 2006. "Bankruptcy law, bonded labor and inequality," Proceedings of the German Development Economics Conference, Berlin 2006 18, Verein für Socialpolitik, Research Committee Development Economics.
  12. Deininger, Klaus, 2010. "Towards sustainable systems of land administration: Recent evidence and challenges for Africa," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 5(1), September.
  13. Kartik B. Athreya & Xuan S. Tam & Eric R. Young, 2011. "Loan guarantees for consumer credit markets," Working Paper 11-06, Federal Reserve Bank of Richmond.

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