Closing the Gap by Securing Individual Rights: The Role of a Commitment to Individual Rights in the Economic Catching-Up Process

27th Annual Conference of the European Association of Law and Economics (EALE), September 2010

35 Pages Posted: 25 Feb 2012

Date Written: July 5, 2010

Abstract

This paper attempts to contribute to the understanding of how individual rights usually associated with democratic institutions affect economic development. The market process approach to innovation (and entrepreneurship) is combined with the stationary bandit approach to property rights to derive a proposition explaining how the lack of an exogenous commitment to property rights can retard innovation. The main proposition is that such an exogenous commitment to secure property rights through respecting individual rights and especially civil or human rights becomes an important factor in the process of catching up for those countries that are relatively close to the most developed ones in terms of technology and thus income. The proposition is tested on cross-country panel data using two different measures of civil liberties and democracy as a proxy for the commitment to secure individual rights. This argument provides one possible explanation for the fact that there is a strong correlation between democracy and income while the correlation between democracy and growth is weak.

Keywords: individual rights, innovation, economic growth

JEL Classification: K11, O43

Suggested Citation

Czegledi, Pal, Closing the Gap by Securing Individual Rights: The Role of a Commitment to Individual Rights in the Economic Catching-Up Process (July 5, 2010). 27th Annual Conference of the European Association of Law and Economics (EALE), September 2010, Available at SSRN: https://ssrn.com/abstract=2010751

Pal Czegledi (Contact Author)

University of Debrecen ( email )

Böszörményi u. 138
H-4032 Debrecen, 4032
Hungary
+ 36-52-416-580 (Phone)
+ 36-52-419-728 (Fax)

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