Alexandr Yarkin1
  • 1 National Research University Higher School of Economics, 20 Myasnitskaya Str., Moscow, 101000, Russian Federation

Endogenous Property Rights and Inequality in Asymmetric Rent-seeking Contest

2015. Vol. 19. No. 1. P. 45–80 [issue contents]
This paper analyses the impact of inequality in wealth distribution on the strength of property rights in non-democratic countries. We construct the model with asymmetric rent-seeking contest and endogenous institutions to demonstrate that the impact of inequality on property rights is non monotonous and conditional on a) what the inequality is driven by: higher aggregate wealth of the ruling class (elite) or its lower share in population; b) how high is the level of inequality, which determines the equilibrium type, conflict regime (with unproductive rent-seeking behavior) or social contract; c) the size of the ruling class, i.e. how limited is the access to power. More asymmetry in wealth distribution between the elite and the mas­ses indeed leads to the emergence of conflict equilibrium. However, as long as economy rests in conflict, the quality of property rights positively depends on the wealth of the elite, but negatively depends on the tightness of the elite class. For this reason, countries with wide-enough ruling class may establish strong institutions both under very high and low levels of inequality, while intermediate cases lead to worse institutions. Moreover, high wealth inequality leads to lower conflict intensity. Consequently, in countries with the most narrow elite lower inequality does not contribute to better institutions, but only increases conflict intensity. We use the results of our model to explain the existent substantial differences in the quality of proper­ty rights institutions between non-democratic regimes, and also interpret some historical ca­ses of institutional development in (post)colonial periods and nowadays.
Citation: Yarkin A. (2015) Endogennye instituty prav sobstvennosti i neravenstvo v modeli s asimmetrichnoy bor'boy za rentu [Endogenous Property Rights and Inequality in Asymmetric Rent-seeking Contest]. HSE Economic Journal, vol. 19, no 1, pp. 45-80 (in Russian)
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