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Private Protection of Property Rights, Inequality, and Economic Growth in Transition Economies

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  • Constantin Sonin

    (Russian European Center for Economic Policy)

Abstract

For economies in transition, the issues of property rights protection provided by the state and implications for economic performance are very important. The paper develops an endogenous growth model with incomplete capital markets and the level of public protection of property rights determined by voting (possibly different from the majority voting). An exogenous in-flow to the economy that constitutes a rent-seeking pie reduces incentives to invest in production and negatively affects the growth rate. An empirical investigation verifies the implications of the model using cross-section data on Russian regions. During transition (since 1992), Russian regions demonstrated enormous differences in growth rates. It is found that these differences may be explained by initial conditions and effectiveness of institutions. Also, positive impact of inequality on the level of public protection of property rights is found and a theoretical explanation for this phenomenon in the framework of the model is provided.

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1300.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:1300

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  1. Roland Bénabou, 1996. "Inequality and Growth," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 11-92 National Bureau of Economic Research, Inc.
  2. 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.
  3. Skaperdas, S., 1991. "Cooperation, Conflict And Power In The Absence Of Property Rights," Papers 90-91-06a, California Irvine - School of Social Sciences.
  4. Alesina, Alberto & Rodrik, Dani, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 465-90, May.
  5. Galor, Oded & Zeira, Joseph, 1988. "Income Distribution and Macroeconomics," MPRA Paper 51644, University Library of Munich, Germany, revised 01 Sep 1989.
  6. Timothy Frye & Andrei Shleifer, 1996. "The Invisible Hand and the Grabbing Hand," NBER Working Papers 5856, National Bureau of Economic Research, Inc.
  7. Grossman, Herschel I & Kim, Minseong, 1995. "Swords or Plowshares? A Theory of the Security of Claims to Property," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1275-88, December.
  8. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1993. "Why Is Rent-Seeking So Costly to Growth?," American Economic Review, American Economic Association, vol. 83(2), pages 409-14, May.
  9. Andrei Shleifer, 1996. "Government in Transition," Harvard Institute of Economic Research Working Papers 1783, Harvard - Institute of Economic Research.
  10. Jack Hirshleifer, 1991. "The Paradox Of Power," Economics and Politics, Wiley Blackwell, vol. 3(3), pages 177-200, November.
  11. Daniel Berkowitz and David N. DeJong & Daniel Berkowitz and David N. DeJong, 1999. "Accounting for Growth in Post-Soviet Russia," William Davidson Institute Working Papers Series 256, William Davidson Institute at the University of Michigan.
  12. Erik Berglof & Ernst-Ludwig von Thadden, 1999. "The Changing Corporate Governance Paradigm: Implications for Transition and Developing Countries," William Davidson Institute Working Papers Series 263, William Davidson Institute at the University of Michigan.
  13. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
  14. Grandmont, Jean-Michel, 1978. "Intermediate Preferences and the Majority Rule," Econometrica, Econometric Society, vol. 46(2), pages 317-30, March.
  15. Skaperdas, Stergios & Syropoulos, Constantinos, 1997. "The Distribution of Income in the Presence of Appropriative Activities," Economica, London School of Economics and Political Science, vol. 64(253), pages 101-17, February.
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