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Boondoogles and expropriation : rent-sseking and policy distortion when property rights are insecure

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Keefer, Philip
Knack, Stephen

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Abstract

Most analyses of property rights and economic development point to the negative influence of insecure property rights on private investment. The authors focus instead on the largely unexamined effects of insecure property rights on government policy choices. They identify one significant anomaly-dramatically higher public investment in countries with insecure property rights-and use it to make the following broad claims about insecure property rights; 1) They increase rent-seeking. 2) They may reduce the incentives of governments to use tax revenues for productive purposes, such as public investment. 3) They do so whether one regards the principal problem of insecure property rights as the maintenance of law and order, which government spending can potentially remedy, or as the threat of expropriation by government itself, and therefore not remediable by government spending. The authors present substantial empirical evidence to support these claims.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2910.

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Date of creation: 31 Oct 2002
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Handle: RePEc:wbk:wbrwps:2910

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Keywords: Environmental Economics&Policies; International Terrorism&Counterterrorism; Labor Policies; Economic Theory&Research; Payment Systems&Infrastructure; Environmental Economics&Policies; Economic Theory&Research; National Governance; Public Sector Economics&Finance; Land and Real Estate Development;

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  9. Kamien, Morton I & Schwartz, Nancy L, 1978. "Potential Rivalry, Monopoly Profits and the Pace of Inventive Activity," Review of Economic Studies, Blackwell Publishing, vol. 45(3), pages 547-57, October. [Downloadable!] (restricted)
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  14. Bellettini, Giorgio & Berti Ceroni, Carlotta, 2000. "Financial Liberalization, Property Rights, and Growth in an Overlapping-Generations Model," Review of International Economics, Blackwell Publishing, vol. 8(2), pages 348-59, May. [Downloadable!] (restricted)
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  15. Beck, Thorsten & Clarke, George & Groff, Alberto & Keefer, Philip & Walsh, Patrick, 2000. "New tools and new tests in comparative political economy - the database of political institutions," Policy Research Working Paper Series 2283, The World Bank. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Keefer, Philip & Khemani, Stuti, 2003. "Democracy, public expenditures, and the poor," Policy Research Working Paper Series 3164, The World Bank. [Downloadable!]
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