An Endogenous Growth model with Insecure Property Rights and Asymmetric Agents

Mardi | 2016-01-26
Sully 5 de 16h à 17h20

Daria ONORI – Cyrille PIATECKI – Diana-Andrada FILIP

This paper studies the relationship between property rights effectiveness, growth and welfare. To this end, we modify Gonzalez [13]’s endogenous growth model by assuming that the population is divided into two groups of consumers-producers: honest agents, who do not challenge the others property, and cheaters, who grab a part of honest people’ss production. The assumption of heterogeneous agents has many important consequences on the equilibrium. The consumption of each class grows at a constant rate and cheaters enjoy a higher level of consumption thanks to appropriation. The growth rates of the group capital varies during the transition. Sustained growth is possible if cheaters consume and accumulate at a higher rate than honest people. Furthermore, because of the grabbing externality, the balanced growth path is indeterminate: there exists a continuum of couple of initial consumption levels compatible with the equilibrium conditions. This implies that the economy may experience different growth paths in the short run, making complex the role of a secure property rights enforcement system. Furthermore, policymakers should be careful in implementing property rights reforms because an increase of property rights enforcement may have an opposite effect on consumption growth and the initial levels of consumption of the two groups compatible with the equilibrium. This may reduce social welfare.