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Why the Rich May Favor Poor Protection of Property Rights

  • Konstantin Sonin

    ()

    (New Economic School/CEFIR, Moscow and CEPR)

In unequal societies, the rich may benefit from shaping economic institutions in their favor. This paper analyzes the dynamics of institutional subversion by focusing on the public protection of property rights. If this institution functions imperfectly, agents have incentives to invest in private protection of property rights. The ability to maintain private protection systems makes the rich natural opponents of public property rights and precludes grass-roots demand to drive the development of the market-friendly institution. The economy becomes stuck in a bad equilibrium with low growth rates, high inequality of income, and wide-spread rent-seeking. The Russian oligarchs of 1990s, who controlled large stakes of newly privatized property, provide motivation for this paper.

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Paper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number w0022.

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Length: 22 pages
Date of creation: Oct 2003
Date of revision:
Handle: RePEc:cfr:cefirw:w0022
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