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Property rights, trust, and economic performance

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  • Teraji, Shinji

Abstract

This article develops a model of how property rights can emerge in the absence of political institutions of enforcement. It analyzes an alternative security mechanism in the community. Individual agents commit themselves to protect property rights. Trust is a cognitive state that one will not be exploited by another. The model presents a behavioral economic framework, in which work effort varies. It is shown that trust is a crucial factor for producing high economic outcomes. The establishment of trust depends on shared mental models. Two equilibrium solutions can exist: one, with a full protection of property rights and a high level of trust, and another, with no protection of property rights and a low level of trust.

Suggested Citation

  • Teraji, Shinji, 2008. "Property rights, trust, and economic performance," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(4), pages 1584-1596, August.
  • Handle: RePEc:eee:soceco:v:37:y:2008:i:4:p:1584-1596
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    References listed on IDEAS

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    Cited by:

    1. Teraji, Shinji, 2009. "A model of corporate social performance: Social satisfaction and moral conduct," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(6), pages 926-934, December.
    2. Maria Litvinova & Maria Luigia Segnana, 2015. "Firm boundaries in Transition countries. The influence of technological and institutional links," DEM Working Papers 2015/05, Department of Economics and Management.
    3. Bezabih, Mintewab & Kohlin, Gunnar & Mannberg, Andrea, 2011. "Trust, tenure insecurity, and land certification in rural Ethiopia," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(6), pages 833-843.

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