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The creation of the rule of law and the legitimacy of property rights : the political and economic consequences of a corrupt privatization

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Author Info
Hoff, Karla
Stiglitz, Joseph E.

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Abstract

How does the lack of legitimacy of property rights affect the dynamics of the creation of the rule of law? The authors investigate the demand for the rule of law in post-communist economies after privatization under the assumption that theft is possible, that those who have"stolen"assets cannot be fully protected under a change in the legal regimetoward rule of law, and that the number of agents with control rights over assets is large. They show that a demand for broadly beneficial legal reform may not emerge because the expectation of weak legal institutions increases the expected relative return to stripping assets, and strippers may gain from a weak and corrupt state. The outcome can be inefficient even from the narrow perspective of the asset-strippers.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3779.

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Date of creation: 01 Dec 2005
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Handle: RePEc:wbk:wbrwps:3779

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Related research
Keywords: Legal Products; Economic Theory&Research; Corruption&Anitcorruption Law; Public Sector Corruption&Anticorruption Measures; Governance Indicators;

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  1. Jean-Jacques Laffont & David Martimort, 1999. "Separation of Regulators Against Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 232-262, Summer. [Downloadable!] (restricted)
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  2. Daniel Kaufmann & Shang-Jin Wei, 1999. "Does "Grease Money" Speed Up the Wheels of Commerce?," NBER Working Papers 7093, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. 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. [Downloadable!] (restricted)
  4. Boycko, Maxim & Shleifer, Andrei & Vishny, Robert W, 1996. "A Theory of Privatisation," Economic Journal, Royal Economic Society, vol. 106(435), pages 309-19, March. [Downloadable!] (restricted)
  5. Gerard Roland & Thierry Verdier, 1999. "Law Enforcement and Transition," William Davidson Institute Working Papers Series 262, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
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  6. Alexander Dyck & Luigi Zingales, 2002. "The Corporate Governance Role of the Media," NBER Working Papers 9309, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Hoff, Karla & Stiglitz, Joseph E., 2002. "After the Big Bang? Obstacles to the emergence of the rule of law in post-communist societies," Policy Research Working Paper Series 2934, The World Bank. [Downloadable!]
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  8. Acemoglu, Daron, 1995. "Reward structures and the allocation of talent," European Economic Review, Elsevier, vol. 39(1), pages 17-33, January. [Downloadable!] (restricted)
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  9. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August. [Downloadable!] (restricted)
  10. Haltiwanger, John & Waldman, Michael, 1991. "Responders versus Non-responders: A New Perspective on Heterogeneity," Economic Journal, Royal Economic Society, vol. 101(408), pages 1085-1102, September. [Downloadable!] (restricted)
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(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. Bruno, Randolph Luca, 2008. "Rule of Law, Institutional Quality and Information," IZA Discussion Papers 3497, Institute for the Study of Labor (IZA). [Downloadable!]
  2. David Martimort & Stephane Straub, 2006. "Privatization and Changes in Corruption Patterns: The Roots of Public Discontent," ESE Discussion Papers 147, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
  3. R. L. Bruno, 2008. "Rule of Law, Institutional Quality and Information," Working Papers 634, Dipartimento Scienze Economiche, Universita' di Bologna. [Downloadable!]
  4. Stefano Porcelli, 2009. "Civilian Tradition and the Chinese Company Law," Transition Studies Review, Springer, vol. 16(2), pages 438-449, June. [Downloadable!] (restricted)
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