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Turning cheap talk into economic growth: On the relationship between property rights and judicial independence

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  • Voigt, Stefan
  • Gutmann, Jerg

Abstract

Among economists, the view that precisely defined and reliably enforced property rights are generally conducive to economic growth has been quasi-unanimous. But recently, some authors have argued that the relationship is more complex than previously acknowledged: property rights reforms might, for example, not per se lead to increases in observed growth rates. This paper contributes to the debate by emphasizing that the mere promise of secure property rights is unlikely to have any effects unless accompanied by some commitment to enforce these rights that is perceived as credible by private actors. An independent judiciary is interpreted as a tool that permits governments to make credible commitments to abide by the law. We provide empirical evidence for a positive growth effect of constitutional property rights, once the judicial system is independent enough to guarantee their enforcement.

Suggested Citation

  • Voigt, Stefan & Gutmann, Jerg, 2013. "Turning cheap talk into economic growth: On the relationship between property rights and judicial independence," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 66-73.
  • Handle: RePEc:eee:jcecon:v:41:y:2013:i:1:p:66-73 DOI: 10.1016/j.jce.2013.01.007
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    References listed on IDEAS

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    1. Dreher, Axel & Voigt, Stefan, 2011. "Does membership in international organizations increase governments' credibility? Testing the effects of delegating powers," Journal of Comparative Economics, Elsevier, pages 326-348.
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    Citations

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    Cited by:

    1. Christian Bjørnskov, 2015. "Constitutional property rights protection and economic growth: evidence from the post-communist transition," Constitutional Political Economy, Springer, pages 247-280.
    2. Jerg Gutmann & Matthias Neuenkirch & Florian Neumeier, 2016. "Precision-Guided or Blunt? The Effects of US Economic Sanctions on Human Rights," MAGKS Papers on Economics 201627, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    3. Voigt, Stefan & Gutmann, Jerg & Feld, Lars P., 2015. "Economic growth and judicial independence, a dozen years on: Cross-country evidence using an updated Set of indicators," European Journal of Political Economy, Elsevier, vol. 38(C), pages 197-211.
    4. Leonid Polishchuk & Georgiy Syunyaev, 2015. "Ruling elites’ rotation and asset ownership: implications for property rights," Public Choice, Springer, pages 159-182.
    5. Méon, Pierre-Guillaume & Sekkat, Khalid, 2015. "The formal and informal institutional framework of capital accumulation," Journal of Comparative Economics, Elsevier, pages 754-771.
    6. Douglas A. Irwin, 2014. "Adam Smith's "Tolerable Administration of Justice" and the Wealth of Nations," NBER Working Papers 20636, National Bureau of Economic Research, Inc.
    7. Peter Foldvari, 2017. "De Facto Versus de Jure Political Institutions in the Long-Run: A Multivariate Analysis, 1820–2000," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 130(2), pages 759-777, January.
    8. Daniel L. Bennett & Hugo J. Faria & James D. Gwartney & Daniel R. Morales, 2016. "Evaluating Alternative Measures of Institutional Protection of Private Property and Their Relative Ability to Predict Economic Development," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 31(Summer 20), pages 57-78.
    9. Jerg Gutmann & Stefan Voigt, 2015. "The rule of law and constitutionalism in Muslim countries," Public Choice, Springer, vol. 162(3), pages 351-380, March.

    More about this item

    Keywords

    Property rights; Credible commitment; Independent judiciary; Constitutional Economics; Transmission channels;

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law

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