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Property Rights, Corruption and the Allocation of Talent: A General Equilibrium Approach

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  • Acemoglu, D.
  • Verdier, T.

Abstract

We consider an economy where property rights are necessary to ensure sufficient rewards to ex ante investments. Because enforcement of property rights influence the ex post distribution of rents, there is room for corruption. We characterize the optimal organization of the society and optimal degree of property right enforcement subject to incentive constraints of the agents. We find that three frequently mentioned government failures arise quite naturally as part of the optimal mechanism; (i) rents for government employees, (ii) corruption, and (iii) misallocation of talent.

Suggested Citation

  • Acemoglu, D. & Verdier, T., 1996. "Property Rights, Corruption and the Allocation of Talent: A General Equilibrium Approach," Working papers 96-5, Massachusetts Institute of Technology (MIT), Department of Economics.
  • Handle: RePEc:mit:worpap:96-5
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    Keywords

    PROPERTY RIGHTS; GENERAL EQUILIBRIUM; ECONOMIC DEVELOPMENT; LAW;

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • H40 - Public Economics - - Publicly Provided Goods - - - General

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