Property Rights and Growth

The paper analyses the long-run equilibrium and adjustment dynamics in models of economic growth where property rights are absent. A comparison with the standard models assesses the importance of property rights quantitatively. In the neoclassical growth model individuals arrive at a lower steady-state level of consumption. The absolute convergence hypothesis does not longer hold. An augmented non--linear Ak economy is capable of long-run growth without institutional arrangements if this holds true for an otherwise identical economy with secure property rights. The lawless economy, however, approaches a lower long-run growth rate which is only up to about half of that of an economy with secure property rights. This is due to a lower investment rate despite identical long--run capital productivity. The model, therefore, can explains conditional convergence.