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Why the Rich May Favor Poor Protection of Property RightsKonstantin SoninNew Economic School; Higher School of Economics; Centre for Economic Policy Research (CEPR) December 1, 2002 Journal of Comparative Economics, Vol. 31, No. 4, pp. 715-731, 2003 Abstract: In unequal societies, the rich may benefit from shaping economic institutions in their favor. This paper analyzes the dynamics of institutional subversion by focusing on the public protection of property rights. If this institution functions imperfectly, agents have incentives to invest in private protection of property rights. The ability to maintain private protection systems makes the rich natural opponents of public property rights and precludes grass-roots demand to drive the development of the market-friendly institution. The economy becomes stuck in a bad equilibrium with low growth rates, high inequality of income, and wide-spread rent-seeking. The Russian oligarchs of 1990s, who controlled large stakes of newly privatized property, provide motivation for this paper.
Number of Pages in PDF File: 22 Keywords: property rights, demand for institutions, oligarchs, Russia JEL Classification: O1, P14, P26 Accepted Paper SeriesDate posted: April 30, 2003 ; Last revised: October 22, 2012Suggested CitationContact Information
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