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A Tale of Markets and Jungles in a Simple Model of Growth

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Author Info
Thomas Gall () (Economic Theory II, University of Bonn)
Paolo Masella () (STICERD, London School of Economics)

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Abstract

Institutions determine prospects for economic growth and development. This paper collapses potentially complex interactions of different institutions into a simple condition on the primitives that determines whether a society supports spot markets or not. In a dynamic model of an agrarian economy agents are heterogeneous in land holdings, skill, and food endowments. Food holdings serve as a proxy for agents' power to expropriate. The main point of interest is whether land is assigned to the skilled or to the powerful, i.e.\ by coalitional expropriation or by markets. The model finds two different types of limit behavior: a sequence of stable markets and a limit cycle where markets and expropriation alternate. More equal first period endowment distributions facilitate sustainable markets that, in turn, enhance economic efficiency and decrease macroeconomic fluctuations.

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Publisher Info
Paper provided by JEPS in its series JEPS Working Papers with number 07-004.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 39 pages
Date of creation: Jul 2007
Date of revision:
Handle: RePEc:jep:wpaper:07004

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Web page: http://jeps.repec.org/

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Related research
Keywords: Expropriation; inequality; institutions; growth; volatility;

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Find related papers by JEL classification:
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation
N40 - Economic History - - Government, War, Law, and Regulation - - - General, International, or Comparative

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