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A Theory of Inalienable Property Rights

Why do democratic societies often impose legal restrictions that render various assets or entitlements inalienable, thereby limiting the disposable property rights of individuals? The explanation proposed here is that these constraints arise as an institutional response against private debt 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 relatively improvident tendencies of some members of society when a majority of individuals share a common distaste for neighborhood squalor. Pourquoi les sociétés démocratiques imposent-elles souvent des restrictions légales limitant les droits ou actifs transférables des individus? L'explication proposée ici est que ces contraintes apparaissent comme une réponse institutionnelle contre des marchés privés des dettes qui, dans un certain sens, fonctionnent `trop bien'. En effet, je démontre comment un marché financier fonctionnant bien peut aller à l'encontre d'une politique sociale sensée assurer un niveau de vie de base minimum pour toutes les catégories d'individus. Des droits de propriété inaliénables et des contraintes sur les dettes émergent comme des réponses institutionnelles naturelles au manque de prévoyance de certains membres de la société lorsqu'une majorité des individus partage un dégoût commun pour la misère avoisinante.

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Paper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number 110.

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Length: 20 pages
Date of creation: Apr 2000
Date of revision:
Handle: RePEc:cre:crefwp:110
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  1. George J. Stigler, 1967. "Imperfections in the Capital Market," Journal of Political Economy, University of Chicago Press, vol. 75, pages 287.
  2. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
  3. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February.
  4. 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.
  5. 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.
  6. Bergstrom, Theodore C, 1999. " Systems of Benevolent Utility Functions," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(1), pages 71-100.
  7. Oliver Hart & John Moore, 1994. "A Theory of Debt Based on the Inalienability of Human Capital," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 841-879.
  8. 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.
  9. Timothy J Kehoe & David K Levine, 1993. "Debt Constrained Asset Markets," Levine's Working Paper Archive 1276, David K. Levine.
  10. 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.
  11. Dwight M. Jaffee & Thomas Russell, 1976. "Imperfect Information, Uncertainty, and Credit Rationing," The Quarterly Journal of Economics, Oxford University Press, vol. 90(4), pages 651-666.
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