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Why the Rich May Favor Poor Protection of Property Rights

Konstantin Sonin ()

No w0022, Working Papers from Center for Economic and Financial Research (CEFIR)

Abstract: In unequal societies, the rich may benefit from shaping economic institutions in their favor. This paper analyzes the dynamics of institutional subversion by focusing on the public protection of property rights. If this institution functions imperfectly, agents have incentives to invest in private protection of property rights. The ability to maintain private protection systems makes the rich natural opponents of public property rights and precludes grass-roots demand to drive the development of the market-friendly institution. The economy becomes stuck in a bad equilibrium with low growth rates, high inequality of income, and wide-spread rent-seeking. The Russian oligarchs of 1990s, who controlled large stakes of newly privatized property, provide motivation for this paper.

Keywords: property rights; demand for institutions; oligarchs; Russia (search for similar items in EconPapers)
JEL-codes: O1 P14 P26 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cwa, nep-his, nep-ifn and nep-tra
Date: 2003-10
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