Economic Growth and Decline with Endogenous Property Rights

This article introduces endogenous institutional changeinto a neoclassical growth model. For some parameter values,all Markov perfect equilibria involve a shift from common propertyto private property followed by a shift back to common property.Even in the presence of a linear production technology, thissequence of switches generates growth rates that are increasingat low levels of capital and decreasing at high levels of capital.This result rationalizes the hump-shaped growth path followedby some countries through history, as well as the conditionalconvergence observed in postwar data. For other parameter values,there are also equilibria in which common property prevails forever.This result rationalizes the low-growth traps in which many poorcountries find themselves.