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Property rights enforcement with unverifiable incomes

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  • Jan U. Auerbach

    (University of Exeter Business School)

Abstract

I study the extent of secure property rights a planner can implement. Agents can produce output, appropriate others’ output, or work in property rights enforcement. The planner pays enforcement personnel using taxes collected from producers who can hide income from taxation at a cost. The planner implements perfectly secure property rights by incentivizing production through redistributive taxation and absorbing potential appropriators as enforcement personnel. Both taxation and employment in enforcement institutionalize redistribution that would otherwise take place through appropriation. Higher costs of hiding income permit more redistributive taxation and less enforcement, leading to more production and higher welfare.

Suggested Citation

  • Jan U. Auerbach, 2019. "Property rights enforcement with unverifiable incomes," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 68(3), pages 701-735, October.
  • Handle: RePEc:spr:joecth:v:68:y:2019:i:3:d:10.1007_s00199-018-1141-9
    DOI: 10.1007/s00199-018-1141-9
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    More about this item

    Keywords

    Costly falsification; Institutions; Property rights; Enforcement;
    All these keywords.

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • P14 - Economic Systems - - Capitalist Systems - - - Property Rights

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