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The Role of the Private Sector under Insecure Property Rights

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  • Tenryu, Yohei

Abstract

Voracious behavior is one of the excess uses of the commons. It is known that the voracity effect can be observed in the economy with common and private capital. We explore another cause of voracious behavior and investigate the effects of voracious behavior on the economy. For this purpose, we introduce a new direction of capital flow. A government mandates that all groups invest their private capital in the common sector to mitigate the effects of excess use of the commons. We show theoretically that there is no standard voracity effect in the sense that Tornell and Lane (1999) define and that a group's equilibrium consumption strategy is the Markov control-state complementarity. We observe numerically that an increase in the contribution of the private sector into the common sector has a negative effect on growth. This implies that the policy for preservation of the commons leads to the harmful effect on the economy.

Suggested Citation

  • Tenryu, Yohei, 2013. "The Role of the Private Sector under Insecure Property Rights," MPRA Paper 50727, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:50727
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    File URL: https://mpra.ub.uni-muenchen.de/60624/9/MPRA_paper_60624.pdf
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    References listed on IDEAS

    as
    1. Ines Lindner & Holger Strulik, 2008. "Social Fractionalization, Endogenous Appropriation Norms, and Economic Development," Economica, London School of Economics and Political Science, vol. 75(298), pages 244-258, May.
    2. Ines Lindner & Holger Strulik, 2004. "Why not Africa? -- Growth and Welfare Effects of Secure Property Rights," Public Choice, Springer, vol. 120(1_2), pages 143-167, July.
    3. Reynolds, Stanley S., 1991. "Dynamic oligopoly with capacity adjustment costs," Journal of Economic Dynamics and Control, Elsevier, vol. 15(3), pages 491-514, July.
    4. 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 1208-1231, December.
    5. Strulik, Holger, 2012. "Poverty, voracity, and growth," Journal of Development Economics, Elsevier, vol. 97(2), pages 396-403.
    6. Ngo Long & Gerhard Sorger, 2006. "Insecure property rights and growth: the role of appropriation costs, wealth effects, and heterogeneity," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 28(3), pages 513-529, August.
    7. Yohei Tenryu, 2013. "Interest in Private Assets and the Voracity Effect," KIER Working Papers 850, Kyoto University, Institute of Economic Research.
    8. Lane, Philip R & Tornell, Aaron, 1996. "Power, Growth, and the Voracity Effect," Journal of Economic Growth, Springer, vol. 1(2), pages 213-241, June.
    9. Mino, Kazuo, 2006. "Voracity vs. scale effect in a growing economy without secure property rights," Economics Letters, Elsevier, vol. 93(2), pages 278-284, November.
    10. Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    differential game; Markov perfect equilibrium; voracity effect.;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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