The Form of Property Rights: Oligarchic vs. Democratic Societies

By Daron Acemoglu. Social Science Research Network, 2003

122 citations recorded by the source corpus.

This paper develops a model where this is a trade-off between the enforcement of the property rights of different groups. An oligarchic' society, where political power is in the hands of major producers, protects their property rights, but also tends to erect significant entry barriers, violating the property rights of future producers. Democracy, where political power is more widely diffuesed, imposes redistributive taxes on the producers, but tends to avoid entry barriers. When taxes in democracy are high and the distortions caused by entry barriers are low, an oligarchic society achieves greater efficiency. Nevertheless, because comparative advantage in entreprenuership shifts away from the incumbents, the inefficiency created by entry barriers in oligarchy deteriorates over time. The typical pattern is therefore one of the rise and decline of oligarchic societies: of two otherwise identical societies, the one with an oligarchic organization will first become richer, but later fall behind the democratic society. I also discuss how democratic societies may be better able to take advantage of new technologies, and how the unequal distribution of income in an oligarchic society supports the oligarchic institutions and may keep them in place even when the become significantly costly to society.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/4a157d2a6abad302fb3751ea8df7924ac44b5cba

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Citations in the corpus

A Simple Model of Inefficient Institutions (2006, background): “Incorporating the fact that the elite will not tax themselves and will redistribute all the revenues to themselves, the maximization problem can be written as 6 The factor price manipulation effect in this model is similar to the role of entry barriers in reducing wages in Acemoglu (2003).”
The challenge of poor governance and corruption (2005, background): “Even if those with good political connections are also good economic managers, there is a long term risk that they will exploit their dominant positions to squeeze out potential competitors (Acemoglu 2003).”
Institutions as a Fundamental Cause of Long-Run Growth (2005, background): “…that protects the property rights of a small elite might not be inimical to economic growth when all major investment opportunities are in the hands of this elite, but could be very harmful when investments and participation by other groups are important for economic growth [see Acemoglu (2003b)l.”
The Role of Institutions in Growth and Development (2010, unknown): “Although investments by the elite can generate economic growth for limited periods, for sustained growth property rights for a broad cross section seem to be crucial (Acemoglu, 2007).”
Institutions matter, but which ones? (2005, unknown): “In this section, I shall first follow the lead of two widelycited references in this literature: Acemoglu, Johnson, and Robinson, (AJR) (2001), and Rodrik, Subramanian and Trebbi, (RST) (2004); carry out some extensions of their work, and then point to some of my reservations about this literature, ”
Innovation across Europe: how important are institutional differences? (2011, background): “In fact, the view that IPRs evolve over time and are driven by economic and political forces has been previously documented (North, 1990; Acemoglu, 2003; Kanwar, 2007; Eicher and Penalosa, 2008).”
Political Connections and Preferential Access to Finance: The Role of Campaign Contributions (2008, unknown): “, Krueger, 1974; Acemoglu, 2005; Morck, Wolfenzon, and Yeung, 2005). The channels for political influence are likely multiple. Rajan and Zingales (2003), for example, argue that incumbents have incentives to oppose financial development because it creates more competition; to maintain their rents, i”
How Well do Institutional Theories Explain Firms' Perceptions of Property Rights? (2005, unknown): “The Law and Finance View is replaced by the Endowments View as the theory with the most explanatory power.”