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A Macroeconomic Model with Property-Rights Capital

Author

Listed:
  • Minxian Sun

    (China Economics and Management Academy, Central University of Finance and Economics)

  • Heng-fu Zou

    (The World Bank
    Institute for Advanced Study, Wuhan University)

Abstract

Property-rights capital stands as a fragile entity, encountering obstacles, regressions, and challenges worldwide. This underscores the necessity to endogenize both property-rights capital accumulation and physical capital accumulation within an integrated dynamic framework. Through this approach, our paper explores the complex interplay between economic variables and institutional capital, with a specific focus on property-rights capital. It emphasizes the necessity of integrating the accumulation of property-rights capital and physical capital within a dynamic framework to fully grasp their interaction. The study reveals that property-rights capital, serving as institutional capital, is deeply interconnected with the accumulation of physical capital, economic growth, and development. Notably, when the cost of new investments in property-rights capital formation rises, it results in decreased long-run property-rights investment, property-rights capital, physical capital, and consumption. Similarly, an increase in the depreciation rate of property-rights capital leads to reductions in long-run property-rights investments, the accumulation of property-rights capital, physical capital, and consumption. Conversely, an increase in the total factor productivity is associated with higher long-run property-rights investments, accumulation of property-rights capital, physical capital, and consumption.

Suggested Citation

  • Minxian Sun & Heng-fu Zou, 2024. "A Macroeconomic Model with Property-Rights Capital," CEMA Working Papers 625, China Economics and Management Academy, Central University of Finance and Economics.
    • Handle: RePEc:cuf:wpaper:625
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    References listed on IDEAS

    as
    1. Friedman, Milton & Appelbaum, Binyamin, 2020. "Capitalism and Freedom," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226734798, December.
    2. Hayek, F. A., 2022. "Law, Legislation, and Liberty, Volume 19," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226781815 edited by Shearmur, Jeremy, December.
    3. Barzel,Yoram & Allen,Douglas W., 2023. "Economic Analysis of Property Rights," Cambridge Books, Cambridge University Press, number 9781009374729, September.
    Full references (including those not matched with items on IDEAS)

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