Boondoggles and Expropriation: Rent-Seeking and Policy Distortion When Property Rights are Insecure

32 Pages Posted: 10 Dec 2002

See all articles by Philip Keefer

Philip Keefer

Inter-American Development Bank

Stephen Knack

World Bank - Development Research Group (DECRG)

Date Written: November 2002

Abstract

Most analyses of property rights and economic development point to the negative influence of insecure property rights on private investment. Keefer and Knack 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:

• They increase rent-seeking.

• They may reduce the incentives of governments to use tax revenues for productive purposes, such as public investment.

• 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.

This paper - a product of the Investment Climate and Public Services Teams, Development Research Group - is part of a larger effort in the group to investigate the institutional roots of effective government policy.

JEL Classification: D92, E62, H54, O11, O40

Suggested Citation

Keefer, Philip and Knack, Stephen, Boondoggles and Expropriation: Rent-Seeking and Policy Distortion When Property Rights are Insecure (November 2002). Available at SSRN: https://ssrn.com/abstract=337540

Philip Keefer (Contact Author)

Inter-American Development Bank ( email )

1300 New York Ave., NW
Washington, DC 20577
United States
202-623-1961 (Phone)

Stephen Knack

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-458-9712 (Phone)

HOME PAGE: http://econ.worldbank.org/staff/sknack

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