The Enforcement of Property Rights and Underdevelopment
22 Pages Posted: 15 Feb 2006
Date Written: September 1999
Abstract
This paper formalizes the role of legal infrastructure in economic development in a general equilibrium model with endogenously determined property rights enforcement. It illustrates the mutual importance of property rights protection and market production by the model`s multiplicity of equilibria. In one equilibrium, property rights are enforced and market activity is unhampered. In the other, property rights are not enforced, which discourages economic activity and leaves the economy without the resources and incentives to enforce property rights. Even identically endowed economies may therefore find themselves in very different equilibria.
Keywords: Property rights multiple equilibria expropriation development
JEL Classification: D23 O41
Suggested Citation: Suggested Citation
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