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Markets and jungles
journal contribution
posted on 2023-06-08, 12:38 authored by Thomas Gall, Paolo MasellaEconomic 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.
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Publication status
- Published
Journal
Journal of Economic GrowthISSN
1381-4338Publisher
Springer VerlagExternal DOI
Issue
2Volume
17Page range
103-141Department affiliated with
- Economics Publications
Full text available
- No
Peer reviewed?
- Yes
Legacy Posted Date
2012-11-01Usage metrics
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