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The Creation of Effective Property Rights

  • Herschel I. Grossman

Traditionally, general-equilibrium models have taken effective property rights to be given and have been concerned only with analysing the allocation of resources among productive uses and the distribution of the resulting product. But, this formulation of the economic problem is incomplete because it neglects that the appropriative activities by which people create the effective property rights that inform allocation and distribution are themselves an alternative use of scarce resources.This paper develops two canonical general-equilibrium models of resource allocation and income distribution that allow for the allocation of time and effort to the creation of effective property rights to valuable resources. In one model the valuable resources are initially in a common pool. In the other model agents initially have nonoverlapping claims to the valuable resources. For both models the analysis reveals how the amount of time and effort that agents allocate to the creation of effective property rights, rather than to production,depends on the environment for creating effective property rights, on the technology of production, and on the scale of the economy. The paper also analyses the security of initial claims to valuable resources and speculates about why initial claims sometimes are perfectly secure.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.91.2.347
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 91 (2001)
Issue (Month): 2 (May)
Pages: 347-352

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Handle: RePEc:aea:aecrev:v:91:y:2001:i:2:p:347-352
Note: DOI: 10.1257/aer.91.2.347
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References listed on IDEAS
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  1. Dani Rodrik, 2006. "Institutions for High-Quality Growth: What They Are and How to Acquire Them," Chapters, in: Institutions, Globalisation and Empowerment, chapter 2 Edward Elgar.
  2. Herschel I. Grossman, 1997. ""Make Us a King": Anarchy, Predation, and the State," NBER Working Papers 6289, National Bureau of Economic Research, Inc.
  3. Herschel I. Grossman & Minseong Kim & Juan Mendoza, 2000. "Decisiveness and the Viability of the State," Working Papers 2000-02, Brown University, Department of Economics.
  4. Lee J. Alston & Gary D. Libecap & Robert Schneider, 1996. "The Determinants and Impact of Property Rights: Land Titles on the Brazilian Frontier," NBER Working Papers 5405, National Bureau of Economic Research, Inc.
  5. Bush, Winston C. & Mayer, Lawrence S., 1974. "Some implications of anarchy for the distribution of property," Journal of Economic Theory, Elsevier, vol. 8(4), pages 401-412, August.
  6. Grossman, Herschel I., 1995. "Insurrections," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 8, pages 191-212 Elsevier.
  7. Herschel I. Grossman & Juan Mendoza, 1999. "Scarcity and Conflict," Working Papers 99-24, Brown University, Department of Economics.
  8. Konrad, Kai A & Skaperdas, Stergios, 1998. "Extortion," Economica, London School of Economics and Political Science, vol. 65(260), pages 461-77, November.
  9. 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.
  10. Hirshleifer, Jack, 1995. "Anarchy and Its Breakdown," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 26-52, February.
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