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The Role of the Private Sector under Insecure Property Rights

Tenryu, Yohei (2013): The Role of the Private Sector under Insecure Property Rights.

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Abstract

It is well known that the so-called voracity effect can be observed in an economy with common and private capital. Voracious behavior is regarded as one of the excess uses of the commons. In this paper, we explore a new interpretation of what causes voracious and investigate the effects of voracious behavior on the economy. For this purpose, we introduce a new direction of capital flow. A government mandates that all groups invest their private capital in the common sector to mitigate the effects of excess use of the commons. We show that, while there is no standard voracity effect, an increase in the contribution of the private sector into the common sector causes more voracious behavior and thus slows economic growth. This implies that policies designed to preserve the commons can lead to a harmful effect on the economy.

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