IDEAS home Printed from https://ideas.repec.org/p/bos/iedwpr/dp-187.html
   My bibliography  Save this paper

Markets and Jungles

Author

Listed:
  • Thomas Gall

    () (University of Bonn)

  • Paolo Masella

    () (Dept. of Economics, University of Mannheim, Germany)

Abstract

Institutions affect prospects for economic growth and development. In this paper a condition on the primitives determines whether an economy supports markets. Agents differ in land holdings, skill, and power. A competitive market assigns land efficiently to the skilled, not necessarily to the powerful. Therefore a market allocation needs to be stable with respect to coalitional expropriation. More equally distributed power and higher congruence of land and power favor stable markets. In a dynamic setting, we identify conditions that ascertain whether markets are stable forever, or alternate with expropriation in a limit cycle, decreasing efficiency and amplifying macroeconomic fluctuations.

Suggested Citation

  • Thomas Gall & Paolo Masella, 2009. "Markets and Jungles," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-187, Boston University - Department of Economics.
  • Handle: RePEc:bos:iedwpr:dp-187
    as

    Download full text from publisher

    File URL: http://www.bu.edu/econ/ied/dp/papers/dp%20187.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
    2. Easterly, William, 2007. "Inequality does cause underdevelopment: Insights from a new instrument," Journal of Development Economics, Elsevier, vol. 84(2), pages 755-776, November.
    3. Herschel I. Grossman, 2001. "The Creation of Effective Property Rights," American Economic Review, American Economic Association, vol. 91(2), pages 347-352, May.
    4. Timothy Besley & Torsten Persson, 2009. "The Origins of State Capacity: Property Rights, Taxation, and Politics," American Economic Review, American Economic Association, vol. 99(4), pages 1218-1244, September.
    5. Daron Acemoglu & Georgy Egorov & Konstantin Sonin, 2008. "Coalition Formation in Non-Democracies," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 987-1009.
    6. Rodrik, Dani, 1999. "Where Did All the Growth Go? External Shocks, Social Conflict, and Growth Collapses," Journal of Economic Growth, Springer, vol. 4(4), pages 385-412, December.
    7. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 465-490.
    8. Grossman, Herschel I, 1994. "Production, Appropriation, and Land Reform," American Economic Review, American Economic Association, vol. 84(3), pages 705-712, June.
    9. Philippe Aghion & Abhijit Banerjee & Thomas Piketty, 1999. "Dualism and Macroeconomic Volatility," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1359-1397.
    10. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-298, April.
    11. Daron Acemoglu & James A. Robinson, 2000. "Why Did the West Extend the Franchise? Democracy, Inequality, and Growth in Historical Perspective," The Quarterly Journal of Economics, Oxford University Press, vol. 115(4), pages 1167-1199.
    12. Daron Acemoglu & Georgy Egorov & Konstantin Sonin, 2012. "Dynamics and Stability of Constitutions, Coalitions, and Clubs," American Economic Review, American Economic Association, vol. 102(4), pages 1446-1476, June.
    13. Daron Acemoglu & James A. Robinson, 2008. "Persistence of Power, Elites, and Institutions," American Economic Review, American Economic Association, vol. 98(1), pages 267-293, March.
    14. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, vol. 10(3), pages 565-591, September.
    15. Rafael Di Tella & Sebastian Galiant & Ernesto Schargrodsky, 2007. "The Formation of Beliefs: Evidence from the Allocation of Land Titles to Squatters," The Quarterly Journal of Economics, Oxford University Press, vol. 122(1), pages 209-241.
    16. Casey B. Mulligan & Ricard Gil & Xavier Sala-i-Martin, 2004. "Do Democracies Have Different Public Policies than Nondemocracies?," Journal of Economic Perspectives, American Economic Association, vol. 18(1), pages 51-74, Winter.
    17. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "The Role of Social Capital in Financial Development," American Economic Review, American Economic Association, vol. 94(3), pages 526-556, June.
    18. Tornell, Aaron, 1997. "Economic Growth and Decline with Endogenous Property Rights," Journal of Economic Growth, Springer, vol. 2(3), pages 219-250, September.
    19. Guido Tabellini, 2010. "Culture and Institutions: Economic Development in the Regions of Europe," Journal of the European Economic Association, European Economic Association, vol. 8(4), pages 677-716, June.
    20. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
    21. Gonzalez, Francisco M., 2007. "Effective property rights, conflict and growth," Journal of Economic Theory, Elsevier, vol. 137(1), pages 127-139, November.
    22. Jordan, J.S., 2006. "Pillage and property," Journal of Economic Theory, Elsevier, vol. 131(1), pages 26-44, November.
    23. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    24. Matteo Cervellati & Piergiuseppe Fortunato & Uwe Sunde, 2008. "Hobbes to Rousseau: Inequality, Institutions and Development," Economic Journal, Royal Economic Society, vol. 118(531), pages 1354-1384, August.
    25. Muthoo, Abhinay, 2004. "A model of the origins of basic property rights," Games and Economic Behavior, Elsevier, vol. 49(2), pages 288-312, November.
    26. Abhijit Banerjee & Lakshmi Iyer, 2005. "History, Institutions, and Economic Performance: The Legacy of Colonial Land Tenure Systems in India," American Economic Review, American Economic Association, vol. 95(4), pages 1190-1213, September.
    27. Acemoglu, Daron & Johnson, Simon & Robinson, James & Thaicharoen, Yunyong, 2003. "Institutional causes, macroeconomic symptoms: volatility, crises and growth," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 49-123, January.
    28. Oded Galor & Omer Moav & Dietrich Vollrath, 2009. "Inequality in Landownership, the Emergence of Human-Capital Promoting Institutions, and the Great Divergence," Review of Economic Studies, Oxford University Press, vol. 76(1), pages 143-179.
    29. Stanley L. Engerman & Kenneth Lee Sokoloff, 2002. "Factor Endowments, Inequality, and Paths of Development Among New World Economies," ECONOMIA JOURNAL, THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION - LACEA, vol. 0(Fall 2002), pages 41-110, August.
    30. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, vol. 10(3), pages 565-591, September.
    31. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
    32. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    33. Roland Bénabou, 1996. "Inequality and Growth," NBER Chapters,in: NBER Macroeconomics Annual 1996, Volume 11, pages 11-92 National Bureau of Economic Research, Inc.
    34. Beatrix Brügger & Rafael Lalive & Josef Zweimüller, 2009. "Does Culture Affect Unemployment? Evidence from the Röstigraben," CESifo Working Paper Series 2714, CESifo Group Munich.
    35. Ghiglino, Christian & Venditti, Alain, 2007. "Wealth inequality, preference heterogeneity and macroeconomic volatility in two-sector economies," Journal of Economic Theory, Elsevier, vol. 135(1), pages 414-441, July.
    36. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
    37. Mark Gradstein, 2007. "Inequality, democracy and the protection of property rights," Economic Journal, Royal Economic Society, vol. 117(516), pages 252-269, January.
    38. Deininger, Klaus & Feder, Gershon, 2001. "Land institutions and land markets," Handbook of Agricultural Economics,in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 6, pages 288-331 Elsevier.
    39. Gregory Clark, 1991. "Yields per acre in English agriculture, 1250-1860: evidence from labour inputs," Economic History Review, Economic History Society, vol. 44(3), pages 445-460, August.
    40. Edward C. Prescott & Stephen L. Parente, 1999. "Monopoly Rights: A Barrier to Riches," American Economic Review, American Economic Association, vol. 89(5), pages 1216-1233, December.
    41. Gradstein, Mark, 2004. "Governance and growth," Journal of Development Economics, Elsevier, vol. 73(2), pages 505-518, April.
    42. Prescott, Edward C, 1998. "Needed: A Theory of Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-551, August.
    43. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," Journal of Economic Growth, Springer, vol. 9(3), pages 271-303, September.
    44. Otsuka, Keijiro, 1991. "Determinants and consequences of land reform implementation in the Philippines," Journal of Development Economics, Elsevier, vol. 35(2), pages 339-355, April.
    45. Sattinger, Michael, 1993. "Assignment Models of the Distribution of Earnings," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 831-880, June.
    46. Thomas Gall, 2008. "Lotteries, inequality, and market imperfection: Galor and Zeira go gambling," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 34(2), pages 359-382, February.
    47. Catherine Hafer, 2006. "On the Origins of Property Rights: Conflict and Productionin the State of Nature," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 119-143.
    48. Abhijit V. Banerjee & Benjamin Moll, 2010. "Why Does Misallocation Persist?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 189-206, January.
    49. Raghuram G. Rajan, 2009. "Rent Preservation and the Persistence of Underdevelopment," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 178-218, January.
    50. Peter Blair Henry & Conrad Miller, 2008. "Institutions vs. Policies: A Tale of Two Islands," NBER Working Papers 14604, National Bureau of Economic Research, Inc.
    51. Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
    52. Grossman, Herschel I, 1991. "A General Equilibrium Model of Insurrections," American Economic Review, American Economic Association, vol. 81(4), pages 912-921, September.
    53. Jonathan Temple & Paul A. Johnson, 1998. "Social Capability and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 965-990.
    54. Michele Piccione & Ariel Rubinstein, 2007. "Equilibrium in the Jungle," Economic Journal, Royal Economic Society, vol. 117(522), pages 883-896, July.
    55. Gradstein, Mark, 2002. "Governance and Growth," CEPR Discussion Papers 3270, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Falkinger, Josef & Grossmann, Volker, 2013. "Oligarchic land ownership, entrepreneurship, and economic development," Journal of Development Economics, Elsevier, vol. 101(C), pages 206-215.

    More about this item

    Keywords

    Expropriation; consistent set; inequality; volatility;

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bos:iedwpr:dp-187. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Program Coordinator). General contact details of provider: http://edirc.repec.org/data/decbuus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.