Explaining the Effect of Financial Development on the Quality of Property Rights

18 Pages Posted: 25 Apr 2019

See all articles by Chandramouli Banerjee

Chandramouli Banerjee

University of Wisconsin - Milwaukee - Department of Economics

Niloy Bose

University of Wisconsin at Milwaukee - Department of Economics; Virginia Polytechnic Institute & State University - Department of Economics

Chitralekha Rath

University of Wisconsin - Milwaukee

Multiple version iconThere are 2 versions of this paper

Date Written: May 2019

Abstract

Empirical evidence suggests that financial development can catalyze property rights reforms. This paper offers a theory of financial markets to explain these facts defining the relationship. The explanation is based on a simple trade‐off between the costs and the benefits of securing property. Securing the right to property at a cost allows agents to post collateral against loans. However, the benefits of collateral vary according to the existing credit market conditions, which we take into account in the tradeoff between the costs and the benefits of securing property rights along the path of financial development to explain the conditions under which financial development can create incentives for better property rights institutions.

Suggested Citation

Banerjee, Chandramouli and Bose, Niloy and Rath, Chitralekha, Explaining the Effect of Financial Development on the Quality of Property Rights (May 2019). Review of Development Economics, Vol. 23, Issue 2, pp. 957-974, 2019, Available at SSRN: https://ssrn.com/abstract=3376862 or http://dx.doi.org/10.1111/rode.12580

Chandramouli Banerjee

University of Wisconsin - Milwaukee - Department of Economics ( email )

3210 N. Maryland Avenue, Bolton Hall 802
Bolton Hall 802
Milwaukee, WI 53211
United States

Niloy Bose (Contact Author)

University of Wisconsin at Milwaukee - Department of Economics ( email )

Bolton Hall
Milwaukee, WI 53211
United States
414-229-6132 (Phone)

HOME PAGE: http://www.uwm.edu/Dept/Economics/faculty/bose.html

Virginia Polytechnic Institute & State University - Department of Economics ( email )

3021 Pamplin Hall
Blacksburg, VA 24061
United States

Chitralekha Rath

University of Wisconsin - Milwaukee ( email )

Bolton Hall 802
3210 N. Maryland Ave.
Milwaukee, WI 53211
United States

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