Capital and growth with oligarchic property rights

Serguey Braguinsky () and Roger B. Myerson

Review of Economic Dynamics, 2007, vol. 10, issue 4, pages 676-704

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)

Keywords: Oligarchs; Political risk; Growth; Capital; Imperfect property rights (search for similar items in EconPapers)
JEL-codes: F43 O10 P14 (search for similar items in EconPapers)
Date: 2007
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