Financial Contracts and the Political Economy of Investor Protection

Pavel Ševčík

American Economic Journal: Macroeconomics, 2012, vol. 4, issue 4, 163-97

Abstract: This paper studies the joint dynamics of investor protection and economic development in a political economy model with capital accumulation and occupational choice. Less investor protection implies higher costs of external financing for entrepreneurs. This excludes poorer agents from entrepreneurship, increasing the profits of the remaining entrepreneurs. The main determinants of investor protection policy preferences are the agent's net worth and the expected return from entrepreneurship. When the policy is chosen by the simple majority rule, the model generates several implications consistent with the observed variation of investor protection over time and across countries. (JEL D72, E22, E32, G18, G38, J24, L26)

JEL-codes: D72 E22 E32 G18 G38 J24 L26 (search for similar items in EconPapers)
Date: 2012
Note: DOI: 10.1257/mac.4.4.163
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/mac.4.4.163 (application/pdf)
http://www.aeaweb.org/aej/mac/data/2011-0058_data.zip (application/zip)
http://www.aeaweb.org/aej/mac/app/2011-0058_app.pdf (application/pdf)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aejmac:v:4:y:2012:i:4:p:163-97

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Journal: Macroeconomics is currently edited by Simon Gilchrist

More articles in American Economic Journal: Macroeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().