Capital and growth with oligarchic property rights

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Capital and growth with oligarchic property rights

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Serguey Braguinsky (SUNY Buffalo)
Roger Myerson (University of Chicago)

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Abstract

To analyze effects of imperfect property rights on economic growth, we consider economies where some fraction of capital can be owned only by local oligarchs, whose status is subject to political risk. Political risk decreases local capital and wages. Risk-averse oligarchs acquire safe foreign assets for insurance, thus increasing wages in other countries that protect outside investors. We show that for empirically reasonable parameter values, reforms to decrease political risk or to protect more outsiders' investments can decrease local oligarchs' welfare by increasing wages, making such reforms prone to political resistance from the ruling elite. We suggest measures of property rights imperfections derived from empirically observable data, and we test the quantitative predictions of our model using those measures and other parameter values routinely assumed in growth theory. (Copyright: Elsevier)

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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 10 (2007)
Issue (Month): 4 (October)
Pages: 676-704
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Handle: RePEc:red:issued:06-195

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Find related papers by JEL classification:
F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
P14 - Economic Systems - - Capitalist Systems - - - Property Rights

References listed on IDEAS
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Leonid Polishchuk & Alexei Savvateev, 2004. "Spontaneous (non)emergence of property rights," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(1), pages 103-127, 03. [Downloadable!] (restricted)
Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May. [Downloadable!] (restricted)
Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 503-30, May. [Downloadable!] (restricted)
Other versions:
- Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1990. "The Allocation of Talent: Implications for Growth," NBER Working Papers 3530, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1990. "The Allocation of Talent: Implicationsfor Growth," University of Chicago - George G. Stigler Center for Study of Economy and State 65, Chicago - Center for Study of Economy and State.
Tornell, Aaron & Velasco, Andes, 1992. "The Tragedy of the Commons and Economic Growth: Why Does Capital Flow from Poor to Rich Countries?," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1208-31, December. [Downloadable!] (restricted)
Sonin, Konstantin, 2003. "Why the rich may favor poor protection of property rights," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 715-731, December. [Downloadable!] (restricted)
Other versions:
- Konstantin Sonin, 2002. "Why the Rich May Favor Poor Protection of Property Rights," William Davidson Institute Working Papers Series 544, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
- Konstantin Sonin, 2003. "Why the Rich May Favor Poor Protection of Property Rights," Working Papers w0022, Center for Economic and Financial Research (CEFIR). [Downloadable!]

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