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Are property rights enough?

Author

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  • Barbara G. Katz
  • Joel Owen

Abstract

We investigate the claim made by proponents of the big-bang strategy that the establishment of property rights in an economy in transition creates its own demand for the enforcement of laws to protect those rights. Our model contains a government engaging in activities to accomplish objectives that depend on public support for the enforcement of the rule of law and agents who interpret the level of activities of the government as indications of the government's intent to enforce the rule of law. Agents, using the level of government activities as an input to their decisions, choose whether to support the government's objectives. We establish conditions under which the level of activities chosen by the government maximizes its benefits, and simultaneously induces the constituency to support enforcement of the rule of law. These conditions provide a basis for the argument for the implementation of the big-bang policy. When these conditions do not hold, however, we show that the level of activities that maximizes the government's benefits may have only a minor impact on support for the enforcement of the rule of law. Two characteristics play an important role in these conditions: the initial level of crime and the types of activities the government chooses to undertake. We present examples showing that the initial level of crime has the more dramatic effect on subsequent support for the rule of law. Copyright (c) 2009 The Authors. Journal compilation (c) 2009 The European Bank for Reconstruction and Development.

Suggested Citation

  • Barbara G. Katz & Joel Owen, 2009. "Are property rights enough?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(1), pages 75-96, January.
  • Handle: RePEc:bla:etrans:v:17:y:2009:i:1:p:75-96
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    References listed on IDEAS

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    Cited by:

    1. Barbara G. Katz, 2010. "Exploring Political Uncertainty's Impact on Crime in Transition," Working Papers 10-02, New York University, Leonard N. Stern School of Business, Department of Economics.
    2. Katz, Barbara G. & Owen, Joel, 2013. "Exploring tax evasion in the context of political uncertainty," Economic Systems, Elsevier, vol. 37(2), pages 141-154.
    3. Ichiro Iwasaki & Taku Suzuki, 2016. "Radicalism Versus Gradualism: An Analytical Survey Of The Transition Strategy Debate," Journal of Economic Surveys, Wiley Blackwell, vol. 30(4), pages 807-834, September.
    4. Barbara G. Katz & Joel Owen, 2011. "The Crime of Tax Evasion in Transition Economies," Working Papers 11-04, New York University, Leonard N. Stern School of Business, Department of Economics.
    5. Barbara G. Katz, 2009. "Crime and Uncertain Punishment in Transition Economies," Working Papers 09-12, New York University, Leonard N. Stern School of Business, Department of Economics.
    6. Giles, John T. & Mu, Ren, 2014. "Village Political Economy, Land Tenure Insecurity, and the Rural to Urban Migration Decision: Evidence from China," IZA Discussion Papers 8630, Institute for the Study of Labor (IZA).
    7. Csaba, László, 2009. "A szovjetológiától az új intézményi közgazdaságtanig - töprengések két évtized távlatából
      [From Sovietology to the new institutional economics - meditations from a distance of two decades]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 749-768.
    8. Ma, Shuang & Mu, Ren, 2017. "Forced off Farm? Labor Allocation Response to Land Requisition in Rural China," IZA Discussion Papers 10640, Institute for the Study of Labor (IZA).

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