Asset Specificity and Change

Bruno Dallago

Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: The economic system includes many assets that are system specific. Economic actors invest in such assets in order to capture the opportunities defined by the system. When systemic change is set in motion by systemic entrepreneurs, uncertainty is created. Together with externalities produced by investment in systemic change and the ensuing alteration of the property right structure, this determines the distribution of transition costs and gains. This produces opportunities for investing valuable resources to weaken third party enforcement and capture gains and avoid costs via transitional redistribution. This situation increases asymmetries, reduces the opportunities for productive outcome, and makes change costly and path dependent. This framework is used to explain the process of change in Central and Eastern Europe.

Date: 1999-06
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hituec:a378

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