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Boondoogles and expropriation : rent-sseking and policy distortion when property rights are insecure

  • Keefer, Philip
  • Knack, Stephen

Most analyses of property rights and economic development point to the negative influence of insecure property rights on private investment. The authors focus instead on the largely unexamined effects of insecure property rights on government policy choices. They identify one significant anomaly-dramatically higher public investment in countries with insecure property rights-and use it to make the following broad claims about insecure property rights; 1) They increase rent-seeking. 2) They may reduce the incentives of governments to use tax revenues for productive purposes, such as public investment. 3) They do so whether one regards the principal problem of insecure property rights as the maintenance of law and order, which government spending can potentially remedy, or as the threat of expropriation by government itself, and therefore not remediable by government spending. The authors present substantial empirical evidence to support these claims.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2910.

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Date of creation: 31 Oct 2002
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Handle: RePEc:wbk:wbrwps:2910
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  1. J. Bradford De Long & Lawrence H. Summers, 1990. "Equipment Investment and Economic Growth," NBER Working Papers 3515, National Bureau of Economic Research, Inc.
  2. Bellettini, Giorgio & Berti Ceroni, Carlotta, 2000. "Financial Liberalization, Property Rights, and Growth in an Overlapping-Generations Model," Review of International Economics, Wiley Blackwell, vol. 8(2), pages 348-59, May.
  3. Sonin, Konstantin, 2003. "Why the rich may favor poor protection of property rights," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 715-731, December.
  4. Shantayanan Devarajan & Vinaya Swaroop & Heng-fu Zou, 1996. "The composition of public expenditure and economic growth," CEMA Working Papers 77, China Economics and Management Academy, Central University of Finance and Economics.
  5. Beck, Thorsten & Clarke, George & Groff, Alberto & Keefer, Philip & Walsh, Patrick, 2000. "New tools and new tests in comparative political economy - the database of political institutions," Policy Research Working Paper Series 2283, The World Bank.
  6. Skaperdas, Stergios, 1992. "Cooperation, Conflict, and Power in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 82(4), pages 720-39, September.
  7. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December.
  8. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
  9. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
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  11. David Stasavage, 2002. "Credible Commitment in Early Modern Europe: North and Weingast Revisited," Journal of Law, Economics and Organization, Oxford University Press, vol. 18(1), pages 155-186, April.
  12. Kamien, Morton I & Schwartz, Nancy L, 1978. "Potential Rivalry, Monopoly Profits and the Pace of Inventive Activity," Review of Economic Studies, Wiley Blackwell, vol. 45(3), pages 547-57, October.
  13. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
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  15. Vito Tanzi & Hamid Reza Davoodi, 1997. "Corruption, Public Investment, and Growth," IMF Working Papers 97/139, International Monetary Fund.
  16. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
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