Working Paper: CEPR ID: DP3270
Authors: Mark Gradstein
Abstract: Because of its inappropriability, protection of property rights is widely recognized as being the state?s responsibility. Moreover, recent empirical evidence suggests that it leads to higher investment levels and faster growth. Nevertheless, the extent of property rights protection differs significantly across countries. This Paper endogenizes the emergence of property rights within a simple growth framework. Drawing on North (1990), we present a model where economic performance and enforcement of property rights may reinforce each other. Depending on initial conditions, the economy can converge to a high-income or a low-income steady state. The existing empirical evidence seems to offer a tentative support for this theory.
Keywords: Economic Growth; Enforcement of Property Rights
JEL Codes: D72; O11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Enforcement of property rights (P14) | Economic growth (O49) |
| Economic growth (O49) | Enforcement of property rights (P14) |
| Enforcement of property rights (P14) | Investment levels (G31) |
| Initial conditions and property rights enforcement (P14) | High-income steady state (D31) |
| Initial conditions and property rights enforcement (P14) | Low-income steady state (I32) |
| International lending institutions (F34) | Governance reforms (G38) |
| Governance indicators (G38) | Per capita income (D31) |