A market without the 'right' property rights

While Vietnam's reforms provided some of the weakest legal private property rights amongst the transitions countries, cities like Ho Chi Minh City have booming domestic real estate markets. Interestingly, while most properties in 2001 did not have legal title, those on the market did advertise a variety of property rights claims. Employing a hedonic price model to analyse the pattern of prices at which sellers offer properties in Ho Chi Minh City, this study examines how this market values property rights. The findings show that multiple forms of property rights, enforced by highly decentralized state institutions, are operational in this market. Furthermore, legal title itself is not the most valuable form of property right. These findings suggest that the value of property rights emanates from where it is enforced within the particular institutional context of a market.     

Evolutionary Stability in the Investment-Opportunism-Retaliation Game

Can economically efficient outcomes be obtained and sustained in the absence of externally enforced property rights? We study the evolutionary properties of a game that exhibits two well-defined Nash equilibria: one generates an inefficient outcome while the other set generates an efficient outcome supported by the potential for retaliation. Although standard forward-looking refinements eliminate the efficient equilibrium, neither equilibrium type satisfies strict evolutionary stability criteria. However, both types of equilibrium define strategies that are neutrally stable, which makes them vulnerable to drift in dynamic environments. We conduct computer simulation experiments in which players learn adaptively via a tournament selection mechanism called sophisticated experimentation. Our simulations demonstrate that while the system spends a disproportionately high proportion of time in the inefficient equilibrium set, the efficient equilibrium is pervasive as the system drifts back and forth between the equilibrium sets, never settling on one or the other.     

Optimal Protection of Property Rights in a General Equilibrium Model of Growth*

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.     

Conjectural variations, symmetric equilibria and economic policy

In this paper, we consider conjectural variations in a simple static general equilibrium model under oligopolistic competition. The modeling of conjectures captures the role played by beliefs in a micro-founded model. So, the economy may have three kinds of symmetric general equilibria. Furthermore, these equilibria can be Pareto-ranked by the conjectural variation parameter. Finally, we consider the implementation of a tax on the strategic behaviors in case of balanced-budget rule. The comparative statics illustrates the idea according to which the effectiveness of the multiplier mechanism to mitigate the market distortions depends on the symmetric equilibrium considered. Therefore, the effect of the tax on the prices and economic activity depends on the degree of market power which is conjectured by the agents.     

Endogenous strength of intellectual property rights: Implications for economic development and growth

The key institution that determines sustained growth in R&D-based growth models is the strength of intellectual property rights, which are usually assumed to be exogenous. In this paper we endogenize the strength of the intellectual property rights and show how private incentives to protect these rights affect economic development and growth. Our model explains endogenous differences in intellectual property rights across countries as private incentives to invest in property rights generate multiple equilibria. We show that the resulting institutional threshold offers an explanation for why the effect of a transfer of institutions from one country to another depends on the quality of the institutions that were imported.     

Cultural differences,insecure property rights and the mode of entry decision

We develop a theory of a multinational corporation’s optimal mode of entry in a new market. The foreign firm can choose between a licensing agreement, a wholly owned subsidiary or shared control (joint venture). In an environment in which property rights are insecure, opportunism is possible, and the identification of new business opportunities is costly, we show that the relationship between the quality of the institutional environment and the mode of entry decision is non-monotonic. Licensing is preferred if property rights are strictly enforced, while a joint venture is chosen when property rights are poorly enforced. For intermediate situations, the better use of local knowledge made possible by shared control under a joint venture works as a double edged sword. On the one hand, it makes the monitoring activity of the multinational more credible, on the other it offers insurance to both parties, potentially compromising the incentives faced by the local partner. We are grateful to the Centro Studi Luca d’Agliano for providing financial support. For useful comments we would like to thank Klaus Desmet, Cecilia Testa, Henry Wan and Gerald Willmann and seminar participants at Cornell, Ente Luigi Einaudi, Fundacao Getulio Vargas, Kiel, Milano, Universidad de Sao Paolo, the Midwest International Economics Meetings in Indianapolis, SAET VI conference in Rhodes, and the City University of Hong Kong Conference on Intellectual Property Rights.     

Historical legacies: A model linking Africa's past to its current underdevelopment

Recent studies have found evidence linking Africa's current under-development to colonial rule and the slave trade. Given that these events ended long ago, why do they continue to matter today? I develop a model, exhibiting path dependence, which provides one explanation for why these past events may have lasting impacts. The model has multiple equilibria: one equilibrium with secure property rights and a high level of production and others with insecure property rights and low levels of production. I show that external extraction, when severe enough, causes a society initially in the high production equilibrium to move to a low production equilibrium. Because of the stability of low production equilibria, the society remains trapped in this suboptimal equilibrium even after the period of external extraction ends. The model provides one explanation why Africa's past events continue to matter today.     

On Norms and Coordination Games: A Rent–Seeking Approach

The aim of this paper is to extend the rent–seeking literature to the equilibrium selection problem in competitive coordination games, i.e., games in which more than one equilibrium exists, and individuals' preferences are opposed. We analyze alternative correlated equilibria: contractual agreements and legally enforced equilibria. The latter are to be understood as the outcome of rents–seeking contests in which players invest resources in order to set a norm. The contest is analyzed in its basic two–person setting and later generalized to the two–populations case. There we show that the outcomes depend on the relative payoff structure of the game, the technological properties of the contest, and the population distribution. Finally, the efficiency analysis focuses not only on the extent of the rent dissipation, but also on the comparative analysis of the inefficiencies that arise in the market (not coordinated) equilibrium.     

CONSTITUTIONAL POLITICAL ECONOMY: PROPERTY CLAIMS IN A DYNAMIC WORLD

Constitutional political economy concerns the legal foundations of the market. One central component of that legal infrastructure relates to property rights over objects and circumstances. The idea of "takings" causes one to focus on the conditions under which regulatory actions call for compensation to those who imagine that their property rights have been taken. A dynamic economy is alleged here to be one in which legal processes must carry the burden of discovering when particular parties have an interest that can be said to constitute a property right requiring compensation. That is, objects and circumstances are not protected because they are "property." Rather, those objects and circumstances that are protected become, by virtue of that protection, "property." The task for the economist is to understand the perverse incentives to flow from a compensation requirement on all instances of institutional change concerning landed property. A further task is to incorporate a dynamic concept of property rights into general equilibrium models of economic systems.     

Property Rights,Public Enforcement,and Growth

We study the link between public enforcement of property rights, innovation investments, and economic growth in an endogenous growth framework with an expanding set of product varieties. We find that a government can assure positive equilibrium growth through public employment in the enforcement of property rights, if the economic environment is sufficiently favorable to growth and/or if public enforcement is sufficiently effective. However, in terms of welfare, an equilibrium path without property‐rights protection and growth might be preferable. In this case, the enforcement of property rights involves too much reallocation of labor from production and research towards the public sector.     

Markov equilibria in dynamic matching and bargaining games

Rubinstein and Wolinsky [Rev. Econ. Stud. 57 (1990) 63] show that a simple homogeneous market with exogenous matching has a continuum of (non-competitive) perfect equilibria; however, the unique Markov-perfect equilibrium of this model is competitive. By contrast, in the more general case of heterogeneous markets, even the Markov property is not enough to guarantee the perfectly competitive outcome. We define a market game that allows for heterogeneous values on both sides of the market and exhibit a number of examples of (non-competitive) Markov-perfect equilibria, with and without discounting. Unlike the homogeneous case, these equilibria allow for inefficient trades and for trade at non-uniform prices. The non-competitive equilibrium may be unique.     

Individual Transferable Quota Markets under Illegal Fishing

The use of individual transferable quotas in fisheries has been considered an opportunity to achieve a given total allowable catch with a maximum social benefit. One of the assumptions used in obtaining that result is that the system is in perfect compliance. The presence of violations and the need for enforcement of tradable property rights systems in fisheries has not received much attention in the literature. The incidents of non-compliance, however, may affect the performance of transferable property rights-based fisheries in unexplored ways. In this paper, we adapt previous literature on enforcing emissions trading programs to analyze a positive model of fisherman behavior that operates under a perfectly competitive individual transferable quota system, while recognizing the opportunities for violations of quota holdings, given incomplete enforcement. Considering a poorly enforced, individual transferable quota system we are able to obtain a number of implications for the current and future equilibrium of the quota market, the time paths of the fishery, and the proper design of a policy rule on total allowable catch (TAC).     

The theory of the labor-managed firm from the membership's perspective with implications for marshallian industry supply

The partial-equilibrium literature on labor-managed (L-M) firms argues that the property-rights structure inhibits economic efficiency and induces perverse responses to price parameters in the short run. But recent general-equilibrium literature demonstrates equivalence of equilibria between L-M and capitalist market economies with the relevant welfare results therefore applying to the L-M economy. Once the L-M firm's maximand is modified to incorporate members' property rights, the short-run industry supply curves of the two economics, under quasi-market conditions consistent with recent Yugoslav reforms, are seen to be equivalent. Hence, the property-rights structure in the L-M economy is compatible with efficiency and normal short-run price responses.     

Retraining the Unemployed in a Model of Equilibrium Employment

An equilibrium model of search and matching is developed to analyse the effects of retraining the unemployed on the market for skilled (or semi-skilled) workers. Versions of the model with free entry of vacancies and fixed numbers of jobs are considered. The latter environment exhibits multiple equilibria. While subsidized training (and enforced participation) is justified on employment grounds, it cannot be justified on efficiency grounds. Policies that, ceteris paribus , lower unemployment, also reduce the incentive to train. When such policies are introduced to a training economy, training may cease and unemployment can rise.     

Paying Close Attention to the Research on Property Right of Market

The property fight of market is a foundation, on which various kinds of micro tangible property rights and intangible property rights exist and realize, and as an economic category, the property right of market appears after the class, the state and the equity title. The contents that are involved in the research on the theory and the practice of property fight of market are extensive, including a lot of aspects such as its key theory, the relation between market economy and international competitiveness, etc. Therefore, the research on the property right of market has very important theoretic and practical significance.     

基于效率的环境产权分配

由于双边道德风险的存在,无论将环境产权分配给排污者还是受害者,一般来说,都难以使双方均作出有效率的预防行动配置决策。因此,在排污者与受害者之间变更环境产权归属,一般并不会导致帕累托最优竞争均衡。本文通过对两种非效率均衡的比较,从确认最低成本预防者角度分析了环境产权的分配。这种规则下的环境产权分配将导致相对更有效率的结果。     

经济共和主义视角下的地权改革—以林权改革为例

林权改革尝试始于20世纪80年代,于2003年加快了改革的步伐,具有了某种激进的色彩。本文认为,这种改革受到效率优先、市场至上、产权私有、强制变迁等信条的影响,有可能使公平和效率出现张力。作者认为在中央政府的改革思想进一步成熟的背景下,林权改革的指导理论需要实现经济共和主义的转向,并提出了四项替代性原则,即处境公平原则、产权有限原则、民主治理原则和法律平衡原则。经济共和主义并不一般地反对私有林权,也不一般地主张公有林权,而是依据具体条件和上述四项原则来形成不同的权利安排。     

Innovation or imitation? The effect of spillovers and competitive pressure on firms’ R&D strategy choice

In this paper a firm’s R&D strategy is assumed to be endogenous and allowed to depend on both internal firm characteristics and external factors. Firms choose between two strategies, either they engage in R&D or abstain from own R&D and imitate the outcomes of innovators. This yields three types of equilibria, in which either all firms innovate, some firms innovate and others imitate, or no firm innovates. Firms’ equilibrium strategies crucially depend on external factors. We find that the efficiency of intellectual property rights protection positively affects firms’ incentives to engage in R&D, while excessive competitive pressure has a negative effect. In addition, smaller firms are found to be more likely to become imitators when the product is homogeneous and the level of spillovers is high. Regarding social welfare our results indicate that strengthening intellectual property protection can have an ambiguous effect. In markets characterized by a high rate of innovation a reduction of intellectual property rights protection can discourage innovative performance substantially. However, a reduction of patent protection can also increase social welfare because it may induce imitation. This indicates that policy issues such as the optimal length and breadth of patent protection cannot be resolved without taking into account specific market and firm characteristics.     

Asymmetry, stability and growth in a step-by-step R&D-race

We define a notion of stability of equilibrium in an infinitely repeated step-by-step R&D race. The unique symmetric equilibrium is shown to be unstable, and stable asymmetric equilibria arise, if product market competition is intense, firms are patient, imitation is difficult and innovations are large. Some predictions based on symmetric equilibria, e.g. that less patient firms always invest less in research, or that more intensive competition leads to higher economic growth, are reversed for “realistic” values of the underlying parameters.     

Socialization and altruism

An important problem in theoretical biology is to explain how altruism can have positive selection value. We model socialization as a costly public good that raises altruism and we study evolution equations for altruistic preferences. Stable cultural (social) equilibria exist in which socialization is supplied privately and property rights exist without civil government. In equilibrium, agents are altruistic in ways not explained by traditional biological theories. The theory essentially formalizes the story in Adam Smith'sTheory of Moral Sentiments.