The Role of the Private Sector under Insecure Property Rights
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.
|Date of creation:||Oct 2013|
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- 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, 05.
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- Strulik, Holger, 2011. "Poverty, Voracity, and Growth," Hannover Economic Papers (HEP) dp-473, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
- 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, 08.
- Ngo Van Long & Gerhard Sorger, 2004. "Insecure Property Rights and Growth: The Roles of Appropriation Costs, Wealth Effects, and Heterogeneity," CESifo Working Paper Series 1253, CESifo Group Munich.
- Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
- Yohei Tenryu, 2013. "Interest in Private Assets and the Voracity Effect," KIER Working Papers 850, Kyoto University, Institute of Economic Research. Full references (including those not matched with items on IDEAS)
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