Insecure Property Rights and Growth: The Roles of Appropriation Costs, Wealth Effects, and Heterogeneity

25 Pages Posted: 14 Sep 2004

See all articles by Ngo Van Long

Ngo Van Long

McGill University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Gerhard Sorger

University of Vienna - Faculty of Business, Economics, and Statistics

Date Written: August 2004

Abstract

We extend the model of insecure property rights by Tornell and Velasco (1992) and Tornell and Lane (1999) by adding three features: (i) extracting the common property asset involves a private appropriation cost, (ii) agents derive utility from wealth as well as from consumption, and (iii) agents can be heterogeneous. We show that both an increase in the appropriation cost and, when appropriation costs vary across agents, an increase in the degree of heterogeneity of these costs reduce the growth rate of the public capital stock. We also show that, in the interior equilibrium, the private asset can have either a lower or a higher money rate of return than the common property asset.

Keywords: corruption, property rights, growth, appropriation cost

JEL Classification: C73, O40

Suggested Citation

Long, Ngo Van and Sorger, Gerhard, Insecure Property Rights and Growth: The Roles of Appropriation Costs, Wealth Effects, and Heterogeneity (August 2004). CESifo Working Paper Series No. 1253. Available at SSRN: https://ssrn.com/abstract=590643

Ngo Van Long (Contact Author)

McGill University - Department of Economics ( email )

855 Sherbrooke Street West
Montreal, QC H3A 2T7
Canada
514-398-4850 (Phone)
514-398-4938 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Gerhard Sorger

University of Vienna - Faculty of Business, Economics, and Statistics ( email )

Vienna, A-1210
Austria

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