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A Theory of Inalienable Property Rights

  • David Andolfatto

Why do democratic societies often impose legal restrictions that render various assets or entitlements inalienable to the individual? The explanation proposed here is that these constraints arise as an institutional response against financial markets that, in a sense, work "too well." That is, I demonstrate how a well-functioning financial market can potentially work against a social policy designed to ensure a basic minimum standard of living for all types of individuals. Inalienable property rights and debt constraints emerge as a natural institutional response to the improvident tendencies of some members of society when a majority of individuals share a common distaste for neighborhood squalor.

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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 110 (2002)
Issue (Month): 2 (April)
Pages: 382-393

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Handle: RePEc:ucp:jpolec:v:110:y:2002:i:2:p:382-393
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  1. Hart, Oliver & Moore, John, 1994. "A Theory of Debt Based on the Inalienability of Human Capital," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 841-79, November.
  2. Galenson, David W, 1981. "The Market Evaluation of Human Capital: The Case of Indentured Servitude," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 446-67, June.
  3. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
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  5. Kehoe, Timothy J & Levine, David K, 1993. "Debt-Constrained Asset Markets," Review of Economic Studies, Wiley Blackwell, vol. 60(4), pages 865-88, October.
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  7. Blackorby, Charles & Donaldson, David, 1988. "Cash versus Kind, Self-selection, and Efficient Transfers," American Economic Review, American Economic Association, vol. 78(4), pages 691-700, September.
  8. Fay, S. & Hurst, E. & White, M.J., 1998. "The Bankruptcy Decision: Does Stigma Matter?," Papers 98-01, Michigan - Center for Research on Economic & Social Theory.
  9. Jaffee, Dwight M & Russell, Thomas, 1976. "Imperfect Information, Uncertainty, and Credit Rationing," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 651-66, November.
  10. George J. Stigler, 1967. "Imperfections in the Capital Market," Journal of Political Economy, University of Chicago Press, vol. 75, pages 287.
  11. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
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