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Markets and jungles

journal contribution
posted on 2023-06-08, 12:38 authored by Thomas Gall, Paolo Masella
Economic institutions determine prospects for growth and development. This paper examines necessary conditions for an economy to support institutions that implement markets. Agents differ in land holdings, skill, and power. A competitive market assigns land to the skilled, not necessarily to the powerful. Therefore a market allocation needs to be robust to coalitional expropriation. In a dynamic setting, market payoffs may induce sufficient inequality in next period’s endowments for markets to alternate with expropriation in a limit cycle, decreasing efficiency and amplifying macroeconomic fluctuations. Long run stability of markets is favored by higher social mobility, more initial equality, and less mismatch between skill and land.

History

Publication status

  • Published

Journal

Journal of Economic Growth

ISSN

1381-4338

Publisher

Springer Verlag

Issue

2

Volume

17

Page range

103-141

Department affiliated with

  • Economics Publications

Full text available

  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2012-11-01

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