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Social Fractionalization, Endogenous Property Rights, and Economic Development

Author

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  • Ines Lindner

    (Université Catholique de Louvain)

  • Holger Strulik

    (Institute of Economics, University of Copenhagen)

Abstract

We investigate how social composition affects competitive and cooperative behavior in a linear growth model without a priori secure property rights. If a society is homogenous or highly fractionalized it is in the self-interest of people to cooperate. The first best allocation is enforced through trigger strategies, property rights turn out to be secure, and growth is independent from social fractionalization. If a society is polarized, i.e. if it consists of a small number of equally sized groups, property rights can turn out as unenforceable. If so, groups follow an exploitive strategy that leads to low investment and growth. In this case the rate of growth is continuously decreasing in the degree of fractionalization and possibly negative.

Suggested Citation

  • Ines Lindner & Holger Strulik, 2004. "Social Fractionalization, Endogenous Property Rights, and Economic Development," Discussion Papers 04-27, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:0427
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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