Abstract

To clarify the determinants and interaction of property rights and transaction costs, I study the design of the property rights on either a good whose consensual transfer entails a transaction inefficiency or an upstream firm’s input whose random cost is nonverifiable and ex ante non-contractible. More disperse traders’ valuations and larger odds that the upstream party can appropriate the quasi-rent induced by contract incompleteness produce more severe transaction inefficiencies and larger incomplete contracting costs, respectively. Larger transaction costs, in turn, induce weaker property rights because of the trade-off between inefficient exclusion from trade/innovation and expropriation. These implications survive when some transactors have more political influence on institutional design, or I consider the disincentive effect of weak property rights. Furthermore, they are consistent with the interplay among proxies for the availability of technological progress, severity of transaction costs and strength of property rights for 139 countries observed between 2006 and 2018.

Details

Title
Property rights, transaction costs, and the limits of the market
Author
Guerriero, Carmine 1 

 University of Bologna, Bologna, Italy (GRID:grid.6292.f) (ISNI:0000 0004 1757 1758) 
Pages
143-176
Publication year
2023
Publication date
Jun 2023
Publisher
Springer Nature B.V.
ISSN
14356104
e-ISSN
14358131
Source type
Scholarly Journal
Language of publication
English
ProQuest document ID
2815842901
Copyright
© The Author(s) 2023. This work is published under http://creativecommons.org/licenses/by/4.0/ (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License.