The protection of private property: the government as a free-rider

This paper develops a positive theory of government that explains the cross country differences in the relative importance of publicly and privately provided protection of property. The theory focuses on the decision of the government to free-ride or not to free-ride on privately provided security. If the government chooses to free-ride on privately provided security then it shirks from the provision of a nonexcludable public good: the deterrence of stealing. The theory implies that governments are more likely to free-ride on privately provided security the less efficient is stealing in capturing private property, the less efficient is the tax system, and the more efficient is stealing in capturing government property. Copyright Springer-Verlag Berlin Heidelberg 2015