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Endogenous Property Rights

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  • Carmine Guerriero

Abstract

Although property rights are key, their determinants are still poorly understood. When property is fully protected, some potential buyers with valuation higher than that of original owners are inefficiently excluded from trade because of transaction costs. When property rights are weak, low-valuation potential buyers inefficiently expropriate original owners. The trade-off between these two misallocations implies that the protection of property will be stronger the more heterogeneous the potential buyer's preferences are. This implication holds true when part of the population has more political influence on institutional design, when transaction costs are determined by either market power or asymmetric information, and when the disincentive effect of weak property rights is taken into account. Moreover, it is consistent with the relationships between measures of ethnolinguistic, genetic, and religious diversity and novel data on the rules on adverse possession and on government takings of real property in 126 jurisdictions.

Suggested Citation

  • Carmine Guerriero, 2016. "Endogenous Property Rights," Journal of Law and Economics, University of Chicago Press, vol. 59(2), pages 313-358.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/686985
    DOI: 10.1086/686985
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    Cited by:

    1. Anderlini, Luca & Felli, Leonardo & Riboni, Alessandro, 2020. "Legal efficiency and consistency," European Economic Review, Elsevier, vol. 121(C).
    2. Benito Arruñada & Giorgio Zanarone & Nuno Garoupa, 2019. "Property Rights in Sequential Exchange," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 35(1), pages 127-153.
    3. Carmine Guerriero, 2023. "Property rights, transaction costs, and the limits of the market," Economics of Governance, Springer, vol. 24(2), pages 143-176, June.
    4. Ephraim Kabunda Munshifwa & Roy Alexander Chileshe & Niraj Jain, 2020. "Evolution of Customary Land Tenure Institutions in Zambia: The Case of Lufwanyama District in the Copperbelt Province," Agrarian South: Journal of Political Economy, Centre for Agrarian Research and Education for South, vol. 9(2), pages 117-143, August.
    5. Benati, Giacomo & Guerriero, Carmine & Zaina, Federico, 2022. "The origins of political institutions and property rights," Journal of Comparative Economics, Elsevier, vol. 50(4), pages 946-968.

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