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Plunder & Protection Inc

  • Halvor Mehlum

    (University of Oslo)

  • Karl Moene

    (University of Oslo)

  • Ragnar Torvik

    (NTNU, Trondheim)

When the state fails to supply basic security and protection of property, violent entrepreneurs not only seize the opportunity of plundering, but some also enter the protection business and provide protection against plunderers. This uncoordinated division of labor is advantageous for the entire group of violent entrepreneurs. Hence, in weak states a situation may arise where a large number of violent entrepreneurs can operate side by side as plunderers and protectors squeezing the producers from both sides. The problem reached new levels at the end of the cold war. As military forces were demobilized without civilian jobs to go to, many countries got an oversupply of qualified violent people for crime, warfare and private protection. In this 'market for extortion' the entry of new violent entrepreneurs enhances the profitability of them all. The supply of violence creates its own demand; an externality of violence that is detrimental to the development in poor countries.

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File URL: http://128.118.178.162/eps/dev/papers/0210/0210002.pdf
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Paper provided by EconWPA in its series Development and Comp Systems with number 0210002.

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Length: 16 pages
Date of creation: 08 Oct 2002
Date of revision:
Handle: RePEc:wpa:wuwpdc:0210002
Note: Type of Document - pdf; prepared on latex; pages: 16
Contact details of provider: Web page: http://128.118.178.162

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  1. Lane, Frederic C., 1958. "Economic Consequences of Organized Violence," The Journal of Economic History, Cambridge University Press, vol. 18(04), pages 401-417, December.
  2. Herschel I. Grossman, 2000. "The Creation of Effective Property Rights," NBER Working Papers 7897, National Bureau of Economic Research, Inc.
  3. Kai A.Konrad & Stergios Skaperdas, 1997. "Backing up Words with Deeds: Information and punishment in organized crime," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 24, pages 51-63.
  4. Stergios Skaperdas, 2002. "Warlord Competition," Journal of Peace Research, Peace Research Institute Oslo, vol. 39(4), pages 435-446, July.
  5. Mehlum, Halvor & Moene, Karl & Torvik, Ragnar, 2003. "Predator or prey?: Parasitic enterprises in economic development," European Economic Review, Elsevier, vol. 47(2), pages 275-294, April.
  6. Paul Collier, 1994. "Demobilization and insecurity: A study in the economics of the transition from war to peace," Journal of International Development, John Wiley & Sons, Ltd., vol. 6(3), pages 343-351, 05.
  7. Azam, Jean-Paul & Bevan, David & Collier, Paul & Dercon, Stefan & Gunning, Jan & Pradhan, Sanjay, 1995. "Some economic consequences of the transition from civil war to peace," Policy Research Working Paper Series 1392, The World Bank.
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