Property rights,rent-seeking and aggregate outcomes in transition economies |
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| Institution: | 1. Université de Montpellier, Avenue de la Mer, 34054 Montpellier Cedex 1, France;2. GREMAQ-LEERNA, Université de Toulouse 1, 21 Allée de Brienne, 31000 Toulouse, France;1. High Technical School of Industrial Engineers of Albacete, University of Castilla-La Mancha, 02071 Albacete, Spain;2. Regional Development Institute, Science and Engineering of Materials, University of Castilla La Mancha, 02071 Albacete, Spain;1. Dept. Sociology and Social Research, University of Trento, Via Verdi, 26, 38122, Trento, Italy;2. Dept. of Political and Social Sciences, European University Institute, Via dei Roccettini, 9, I-50014, San Domenico di Fiesole, FI, Italy;1. CER-ETH Center of Economic Research at ETH Zurich, CH-8092 Zurich, Switzerland;2. School of Energy and Environment, City University of Hong Kong, Hong Kong;1. Warwick Business School, Warwick University, Scarman Road, Coventry, CV4 7AL, United Kingdom;2. School of Economics, Finance and Accounting, Faculty of Business and Law, Coventry University, Priory Street, Coventry, CV1 5FB, United Kingdom |
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| Abstract: | We analyze the macroeconomic consequences of rent-seeking activities in transition economies. Due to strategic complementarities in modernization of firms, multiple equilibria can occur. However, given the institutional vacuum, the macroeconomic outcomes crucially depend on how property rights are distributed and on the number of contestants over the surplus of the firms. Under inside ownership, the distributional conflict between inside workers, within each firm, may lead to a bad equilibrium without modernization. Outside ownership adds another level of distributional conflict (between insiders and outsiders) but may lead to a high equilibrium with modernization as the number of outside owners increases. |
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