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Why the rich may favor poor protection of property rights

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  • Sonin, Konstantin

Abstract

In unequal societies, the rich may benefit from shaping economic institutions in their favor. This paper analyzes the dynamics of institutional subversion by focusing on the public protection of property rights. If this institution functions imperfectly, agents have incentives to invest in private protection of property rights. The ability to maintain private protection systems makes the rich natural opponents of public property rights and precludes grass-roots demand to drive the development of the market-friendly institution. The economy becomes stuck in a bad equilibrium with low growth rates, high inequality of income, and wide-spread rent-seeking. The Russian oligarchs of 1990s, who controlled large stakes of newly privatized property, provide motivation for this paper.
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  • Sonin, Konstantin, 2003. "Why the rich may favor poor protection of property rights," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 715-731, December.
  • Handle: RePEc:eee:jcecon:v:31:y:2003:i:4:p:715-731
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    More about this item

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • P14 - Economic Systems - - Capitalist Systems - - - Property Rights
    • P26 - Economic Systems - - Socialist Systems and Transition Economies - - - Political Economy

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