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Appropriation, Formal and Informal Sectors, and Efficient Endowment Distribution

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  • Suk Jae Noh

Abstract

By adding an informal sector whose output is not subject to appropriative interactions and assuming complementarity in the inputs for market production, this paper investigates how possible asymmetries in conflict affect the allocation of resources. It is shown that when the existing gap in relative appropriative skills is being closed, more resources are allocated to appropriative activities in the economy. We are, in this case, more likely to see a reduction in market activities but an increase in home activities. A poorer party is a natural producer rather than a natural fighter, which is the usual characterization of a less endowed party in the conflict analysis. By conducting a welfare analysis, this paper shows that a market-output-maximizing initial distribution of resources endowment is such that when one party has a comparative advantage in market production over appropriation, its initial fraction of total resource endowment should be greater than its relative productivity in market production.

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  • Suk Jae Noh, 2009. "Appropriation, Formal and Informal Sectors, and Efficient Endowment Distribution," International Economic Journal, Taylor & Francis Journals, vol. 23(3), pages 309-323.
    • Handle: RePEc:taf:intecj:v:23:y:2009:i:3:p:309-323
    DOI: 10.1080/10168730903119393
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    References listed on IDEAS

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    5. Roland Bénabou, 1996. "Inequality and Growth," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 11-92, National Bureau of Economic Research, Inc.
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