The Creation of the Rule of Law and the Legitimacy of Property Rights: The Political and Economic Consequences of a Corrupt Privatization / Karla Hoff, Joseph E. Stiglitz.

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Hoff, Karla

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w11772.Publication details: Cambridge, Mass. National Bureau of Economic Research 2005.Description: 1 online resource: illustrations (black and white)Subject(s):

K0 - General

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Abstract: How does the lack of legitimacy of property rights affect the dynamics of the creation of the rule of law? We investigate the demand for the rule of law in post-Communist economies after privatization under the assumption that theft is possible, that those who have "stolen" assets cannot be fully protected under a change in the legal regime towards rule of law, and that the number of agents with control rights over assets is large. We show that a demand for broadly beneficial legal reform may not emerge because the expectation of weak legal institutions increases the expected relative return to stripping assets, and strippers may gain from a weak and corrupt state. The outcome can be inefficient even from the narrow perspective of the asset-strippers.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w11772 (Browse shelf(Opens below))	Not For Loan

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November 2005.

How does the lack of legitimacy of property rights affect the dynamics of the creation of the rule of law? We investigate the demand for the rule of law in post-Communist economies after privatization under the assumption that theft is possible, that those who have "stolen" assets cannot be fully protected under a change in the legal regime towards rule of law, and that the number of agents with control rights over assets is large. We show that a demand for broadly beneficial legal reform may not emerge because the expectation of weak legal institutions increases the expected relative return to stripping assets, and strippers may gain from a weak and corrupt state. The outcome can be inefficient even from the narrow perspective of the asset-strippers.