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Economic Growth and Decline with Endogenous Property Rights

  • Aaron Tornell

This article introduces endogenous institutional change into a neoclassical growth model. For some parameter values, all Markov perfect equilibria involve a shift from common property to private property followed by a shift back to common property. Even in the presence of a linear production technology, this sequence of switches generates growth rates that are increasing at low levels of capital and decreasing at high levels of capital. This result rationalizes the hump-shaped growth path followed by some countries through history, as well as the conditional convergence observed in postwar data. For other parameter values, there are also equilibria in which common property prevails forever. This result rationalizes the low-growth traps in which many poor countries find themselves. Copyright 1997 by Kluwer Academic Publishers

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Paper provided by Harvard - Institute of Economic Research in its series Harvard Institute of Economic Research Working Papers with number 1739.

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Date of creation: 1995
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Handle: RePEc:fth:harver:1739
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  1. Simon, Leo K & Stinchcombe, Maxwell B, 1989. "Extensive Form Games in Continuous Time: Pure Strategies," Econometrica, Econometric Society, vol. 57(5), pages 1171-1214, September.
  2. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
  3. Tornell, Aaron & Velasco, Andes, 1992. "The Tragedy of the Commons and Economic Growth: Why Does Capital Flow from Poor to Rich Countries?," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1208-31, December.
  4. Sergio Rebelo, 1999. "Long Run Policy Analysis and Long Run Growth," Levine's Working Paper Archive 2114, David K. Levine.
  5. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  6. Reinganum, Jennifer F., . "On the Diffusion of New Technology: A Game Theoretic Approach," Working Papers 312, California Institute of Technology, Division of the Humanities and Social Sciences.
  7. Azariadis, Costas & Drazen, Allan, 1990. "Threshold Externalities in Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 501-26, May.
  8. Haurie, Alain & Pohjola, Matti, 1987. "Efficient equilibria in a differential game of capitalism," Journal of Economic Dynamics and Control, Elsevier, vol. 11(1), pages 65-78, March.
  9. Baumol, William J & Wolff, Edward N, 1988. "Productivity Growth, Convergence, and Welfare: Reply," American Economic Review, American Economic Association, vol. 78(5), pages 1155-59, December.
  10. Hendricks, Kenneth & Wilson, Charles, 1987. "Equilibrium in Preemption Games with Complete Information," Working Papers 87-02, C.V. Starr Center for Applied Economics, New York University.
  11. Lancaster, Kelvin, 1973. "The Dynamic Inefficiency of Capitalism," Journal of Political Economy, University of Chicago Press, vol. 81(5), pages 1092-1109, Sept.-Oct.
  12. Fudenberg, Drew & Tirole, Jean, 1985. "Preemption and Rent Equilization in the Adoption of New Technology," Review of Economic Studies, Wiley Blackwell, vol. 52(3), pages 383-401, July.
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