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Title:Markets and Jungles PDF Logo
Authors:Gall, Thomas
Masella, Paolo
Issue Date:2011
Series/Report no.:Proceedings of the German Development Economics Conference, Berlin 2011 30
Abstract: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 demand and supply.
Subjects:Expropriation
market institutions
inequality
fluctuations
coalition formation
JEL:E02
O43
C71
Document Type:Conference Paper
Appears in Collections:Proceedings of the German Development Economics Conference, 2011 (Berlin)

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