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The Property-Contract Balance

Author

Listed:
  • Giuseppe Dari-Mattiacci
  • Carmine Guerriero
  • Zhenxing Huang

Abstract

We identify a key trade-off between protecting property rights and enhancing reliance on contracts. For instance, when a dishonest intermediary transfers a good to an innocent buyer without the owner's consent, should the buyer or the owner retain the good? We show that the optimal rule maximizes the agents' valuation of the good rather than their incentives to protect property and inquire about title. Furthermore, enhancing reliance on contracts is more appealing in countries where fewer intermediaries are honest and law enforcement is more efficient. This is consistent with novel comparative-law data on the acquisition of ownership over movables.

Suggested Citation

  • Giuseppe Dari-Mattiacci & Carmine Guerriero & Zhenxing Huang, 2016. "The Property-Contract Balance," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 172(1), pages 40-64, March.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201603)172:1_40:tpb_2.0.tx_2-1
    DOI: 10.1628/093245613X14500948553956
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    References listed on IDEAS

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    1. Edward L. Glaeser & Andrei Shleifer, 2003. "The Rise of the Regulatory State," Journal of Economic Literature, American Economic Association, vol. 41(2), pages 401-425, June.
    2. Besley, Timothy & Ghatak, Maitreesh, 2010. "Property Rights and Economic Development," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4525-4595, Elsevier.
    3. Boranbay, Serra & Guerriero, Carmine, 2019. "Endogenous (in)formal institutions," Journal of Comparative Economics, Elsevier, vol. 47(4), pages 921-945.
    4. Kenneth Ayotte & Patrick Bolton, 2011. "Optimal Property Rights in Financial Contracting," The Review of Financial Studies, Society for Financial Studies, vol. 24(10), pages 3401-3433.
    5. Philippe Aghion & Yann Algan & Pierre Cahuc & Andrei Shleifer, 2010. "Regulation and Distrust," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(3), pages 1015-1049.
    6. repec:hal:spmain:info:hdl:2441/4km7l02j139aj8hl7kcccmqk9s is not listed on IDEAS
    7. Dani Rodrik & Mark Rosenzweig (ed.), 2010. "Handbook of Development Economics," Handbook of Development Economics, Elsevier, edition 1, volume 5, number 6.
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    Cited by:

    1. Christoph Engel & Urs Schweizer, 2016. "Beyond Privity 33rd International Seminar on the New Institutional Economics June 10-13, 2015, Edinburgh, United Kingdom," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 172(1), pages 1-4, March.
    2. Arruñada, Benito, 2017. "Property as sequential exchange: the forgotten limits of private contract," Journal of Institutional Economics, Cambridge University Press, vol. 13(4), pages 753-783, December.
    3. Murat C. Mungan, 2016. "The Property-Contract Balance," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 172(1), pages 70-74, March.

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    More about this item

    JEL classification:

    • P14 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Property Rights
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • Z10 - Other Special Topics - - Cultural Economics - - - General
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law

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