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Optimal Protection of Property Rights in a General Equilibrium Model of Growth *
Author(s) -
Economides George,
Park Hyun,
Philippopoulos Apostolis
Publication year - 2007
Publication title -
scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/j.1467-9442.2007.00486.x
Subject(s) - property rights , economics , general equilibrium theory , enforcement , competitive equilibrium , government (linguistics) , microeconomics , revenue , tax revenue , endogenous growth theory , optimal tax , public economics , overlapping generations model , law , market economy , finance , human capital , linguistics , philosophy , political science
We incorporate weak property rights into an otherwise standard general equilibrium model of growth and second‐best optimal policy. In this setup, the state plays two of its key roles: it protects property rights and provides public services. The government chooses policy (the income tax rate, as well as the allocation of collected tax revenues between law enforcement and public services) to maximize the growth rate of the economy. The focus of our analysis is on how weak property rights generate multiple decentralized competitive equilibria, the different properties of these equilibria, and the implications of second‐best optimal policies.