The de Soto E¤ect: Markets, Networks, and the Political Economy of Property Rights
نویسنده
چکیده
It is widely understood that the operation of markets requires supporting legal structures. An emerging body of evidence on the importance of property rights and legal systems is inuencing policy debates and is allied to a resurgent interest in how institutions shape economic prosperity. This paper studies the argument that improving legal systems increases the extent to which wealth can be used as collateral leading to gains from trade and increased productivity. We christen this the de Soto e¤ect after the inuential commentaries in this area by Hernando de Soto. We develop a workhorse model to look at these issues, with special focus on the link between markets and networks and the general equilibrium e¤ects of reforms in property rights. We also explore the political economy of investments in market-supporting legal institutions emphasizing the roles played by wealth inequality and social networks. Preliminary draft. Comments welcome.
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