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The Role of the Private Sector under Insecure Property Rights

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  • Tenryu, Yohei

Abstract

Voracious behavior is one of the excess uses of the commons. It is known that the voracity effect can be observed in the economy with common and private capital. We explore another cause of voracious behavior and investigate the effects of voracious behavior on the economy. For this purpose, we introduce a new direction of capital flow. A government mandates that all groups invest their private capital in the common sector to mitigate the effects of excess use of the commons. We show theoretically that there is no standard voracity effect in the sense that Tornell and Lane (1999) define and that a group's equilibrium consumption strategy is the Markov control-state complementarity. We observe numerically that an increase in the contribution of the private sector into the common sector has a negative effect on growth. This implies that the policy for preservation of the commons leads to the harmful effect on the economy.

Suggested Citation

  • Tenryu, Yohei, 2013. "The Role of the Private Sector under Insecure Property Rights," MPRA Paper 50727, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:50727
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    References listed on IDEAS

    as
    1. Ines Lindner & Holger Strulik, 2008. "Social Fractionalization, Endogenous Appropriation Norms, and Economic Development," Economica, London School of Economics and Political Science, vol. 75(298), pages 244-258, May.
    2. Ngo Long & Gerhard Sorger, 2006. "Insecure property rights and growth: the role of appropriation costs, wealth effects, and heterogeneity," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 28(3), pages 513-529, August.
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    5. Mino, Kazuo, 2006. "Voracity vs. Scale Effect in a Growing Economy," MPRA Paper 16999, University Library of Munich, Germany.
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    8. 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 1208-1231, December.
    9. Yohei Tenryu, 2013. "Interest in Private Assets and the Voracity Effect," KIER Working Papers 850, Kyoto University, Institute of Economic Research.
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    More about this item

    Keywords

    differential game; Markov perfect equilibrium; voracity effect.;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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