Advanced Search
MyIDEAS: Login to save this paper or follow this series

Why the Rich May Favor Poor Protection of Property Rights

Contents:

Author Info

  • Konstantin Sonin

    ()

Abstract

In unequal societies, the rich might benefit from shaping economic institutions into their favor. This paper analyzes the dynamics of institutional subversion focusing on one particular institution, public protection of property rights. If this institution is imperfect, agents have incentives to invest in private protection of property rights. With economies of scale in private protection, rich agents have a significant advantage: they could expropriate other agents using their private protection capacities. Ability to maintain private protection system makes the rich natural opponents of full protection of property rights provided by the state. Such an environment does not allow grass-roots demand to drive development of new market-friendly institutions (such as public protection of property rights). The economy as a whole is stuck in a ’bad’ long-run equilibrium with low growth rate, high inequality, and wide-spread rent-seeking. The Russian ‘oligarchs’ of 1990s, a handful of politically powerful agents that controlled large stakes of newly privatized property, we re the major motivation for this paper.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp544.pdf
Download Restriction: no

Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 544.

as in new window
Length: 53 pages
Date of creation: 01 Dec 2002
Date of revision:
Handle: RePEc:wdi:papers:2003-544

Contact details of provider:
Postal: 724 E. University Ave, Wyly Hall 1st Flr, Ann Arbor MI 48109
Phone: 734 763-5020
Fax: 734 763 5850
Email:
Web page: http://www.wdi.umich.edu
More information through EDIRC

Related research

Keywords: economic institutions; property rights; political economy; inequality;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Roland Benabou, 1996. "Inequality and Growth," NBER Working Papers 5658, National Bureau of Economic Research, Inc.
  2. Djankov, Simeon & Murrell, Peter, 2002. "Enterprise Restructuring in Transition: A Quantitative Survey," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3319, C.E.P.R. Discussion Papers.
  3. Timothy Frye & Andrei Shleifer, 1996. "The Invisible Hand and the Grabbing Hand," NBER Working Papers 5856, National Bureau of Economic Research, Inc.
  4. Grandmont, Jean-Michel, 1978. "Intermediate Preferences and the Majority Rule," Econometrica, Econometric Society, Econometric Society, vol. 46(2), pages 317-30, March.
  5. Daron Acemoglu & James A. Robinson, 2001. "A Theory of Political Transitions," American Economic Review, American Economic Association, American Economic Association, vol. 91(4), pages 938-963, September.
  6. Simon Johnson & John McMillan & Christopher Woodruff, 2000. "Entrepreneurs and the Ordering of Institutional Reform: Poland, Slovakia, Romania, Russia and Ukraine Compared," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 8(1), pages 1-36, March.
  7. Johnson, Simon & Kaufmann, Daniel & McMillan, John & Woodruff, Christopher, 2000. "Why do firms hide? Bribes and unofficial activity after communism," Journal of Public Economics, Elsevier, Elsevier, vol. 76(3), pages 495-520, June.
  8. repec:umd:umdeco:murrelllaw is not listed on IDEAS
  9. Polterovich, Victor, 2001. "Rent Seeking, Tax Policy, and Economic Growth," MPRA Paper 20058, University Library of Munich, Germany.
  10. Atkinson,Anthony Barnes & Micklewright,John, 1992. "Economic Transformation in Eastern Europe and the Distribution of Income," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521438827.
  11. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, Springer, vol. 9(2), pages 131-165, 06.
  12. Dollar, David & Kraay, Aart, 2001. "Trade, growth, and poverty," Policy Research Working Paper Series 2615, The World Bank.
  13. Shleifer, Andrei, 1997. "Government in transition," European Economic Review, Elsevier, Elsevier, vol. 41(3-5), pages 385-410, April.
  14. Leonid Polishchuk & Alexei Savvateev, 2004. "Spontaneous (non)emergence of property rights," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 12(1), pages 103-127, 03.
  15. Alesina, Alberto & Rodrik, Dani, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(2), pages 465-90, May.
  16. Berkowitz, Daniel & DeJong, David N., 1999. "Russia's internal border," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 29(5), pages 633-649, September.
  17. Simon Johnson & John McMillan & Christopher Woodruff, 2002. "Property Rights and Finance," NBER Working Papers 8852, National Bureau of Economic Research, Inc.
  18. Edward L. Glaeser & Andrei Shleifer, 2001. "Legal Origins," NBER Working Papers 8272, National Bureau of Economic Research, Inc.
  19. James E. Anderson & Douglas Marcouiller, 2002. "Insecurity And The Pattern Of Trade: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 342-352, May.
  20. Vladimir Popov, 2000. "Shock Therapy Versus Gradualism: The End Of The Debate (Explaining The Magnitude Of Transformational Recession)," Comparative Economic Studies, Palgrave Macmillan, vol. 42(1), pages 1-57, April.
  21. Earle, John S. & Peter, Klara Sabirianova, 2000. "Equilibrium Wage Arrears: A Theoretical and Empirical Analysis of Institutional Lock-In," IZA Discussion Papers 196, Institute for the Study of Labor (IZA).
  22. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Legal Determinants of External Finance," Working Paper 19443, Harvard University OpenScholar.
  23. Kathryn Hendley & Peter Murrell & Randi Ryterman, 1998. "Law, Relationships, and Private Enforcement: Transactional Strategies of Russian Enterprises," Electronic Working Papers, University of Maryland, Department of Economics 98-001, University of Maryland, Department of Economics.
  24. Johnson, Simon & Mitton, Todd, 2003. "Cronyism and capital controls: evidence from Malaysia," Journal of Financial Economics, Elsevier, Elsevier, vol. 67(2), pages 351-382, February.
  25. Edward L. Glaeser & Andrei Shleifer, 2002. "The Injustice of Inequality," NBER Working Papers 9150, National Bureau of Economic Research, Inc.
  26. Raghuram G. Rajan & Luigi Zingales, 1998. "Which Capitalism? Lessons from the East Asian Crisis," CRSP working papers, Center for Research in Security Prices, Graduate School of Business, University of Chicago 486, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  27. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
  28. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1993. "Why Is Rent-Seeking So Costly to Growth?," American Economic Review, American Economic Association, American Economic Association, vol. 83(2), pages 409-14, May.
  29. Polyakov, Evgeny, 2001. "Changing trade patterns after conflict resolution in the South Caucasus," Policy Research Working Paper Series 2593, The World Bank.
  30. Skaperdas, Stergios, 1992. "Cooperation, Conflict, and Power in the Absence of Property Rights," American Economic Review, American Economic Association, American Economic Association, vol. 82(4), pages 720-39, September.
  31. Maxim Boycko & Andrei Shleifer & Robert W. Vishny, 1993. "Privatizing Russia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2), pages 139-192.
  32. Edward L. Glaeser & Andrei Shleifer, 2001. "The Rise of the Regulatory State," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1934, Harvard - Institute of Economic Research.
  33. Raghuram G. Rajan & Luigi Zingales, 2001. "The Great Reversals: The Politics of Financial Development in the 20th Century," NBER Working Papers 8178, National Bureau of Economic Research, Inc.
  34. Djankov, Simeon & La Porta, Rafael & López-de-Silanes, Florencio & Shleifer, Andrei, 2002. "Courts: The Lex Mundi project," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3344, C.E.P.R. Discussion Papers.
  35. Simon Johnson & John McMillan & Christopher Woodruff, 1999. "Contract Enforcement in Transition," CESifo Working Paper Series 211, CESifo Group Munich.
  36. 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, University of Chicago Press, vol. 103(6), pages 1275-88, December.
  37. Berkowitz, Daniel & DeJong, David N., 2002. "Accounting for growth in post-Soviet Russia," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 32(2), pages 221-239, March.
  38. Luttmer, Erzo F.P., 2001. "Measuring poverty dynammics and inequality in transition economies - disentangling real events from noisy data," Policy Research Working Paper Series 2549, The World Bank.
  39. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, American Economic Association, vol. 84(3), pages 600-621, June.
  40. Sonin, Konstantin, 1999. "Inequality, Property Rights Protection, and Economic Growth in Transition Economies: Theory and Russian Evidence," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2300, C.E.P.R. Discussion Papers.
  41. Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, Elsevier, vol. 58(1-2), pages 81-112.
  42. Skaperdas, Stergios & Syropoulos, Constantinos, 1997. "The Distribution of Income in the Presence of Appropriative Activities," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 64(253), pages 101-17, February.
  43. Verdier, Thierry, 1994. "Models of political economy of growth: A short survey," European Economic Review, Elsevier, Elsevier, vol. 38(3-4), pages 757-763, April.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wdi:papers:2003-544. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Laurie Gendron).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.