Working Paper: NBER ID: w9282
Authors: Karla Hoff; Joseph E. Stiglitz
Abstract: When Russia launched mass privatization, it was widely believed that it would create a powerful constituency for the rule of law. That didn't happen. We present a dynamic equilibrium model of the political demand for the rule of law and show that beneficiaries of mass privatization may fail to demand the rule of law even if it is the Pareto efficient rule of the game.' The reason is that uncertainty about the legal regime can lead to asset stripping, and stripping can give agents an interest in prolonging the absence of the rule of law.
Keywords: No keywords provided
JEL Codes: P26
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| uncertainty surrounding the legal regime (D89) | asset stripping (G33) |
| asset stripping (G33) | demand for the rule of law (K40) |
| mass privatization (L33) | political demand for the rule of law (K40) |
| historical legacies of corruption and market failures (H57) | weak political demand for the rule of law (P37) |