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Forms of Property Rights: Oligarchic Versus Democratic Societies



Daron Acemoglu, MIT

Date and Time

March 3, 2005 12:00 PM - 1:30 PM




Encina Basement Conf RoomEncina Hall 616 Serra St., E008 (Ground floor) Stanford University Stanford, CA 94305

FSI Contact

Kimberly A. Fraser

Daron Acemoglu is Charles P. Kindleberger Professor of Applied Economics in the Department of Economics at the Massachusetts Institute of Technology and a member of the Economic Growth program of the Canadian Institute of Advanced Research. He is also affiliated with the National Bureau Economic Research, Center for Economic Performance, and Center for Economic Policy Research.

His work has been published in leading scholarly journals, including the American Economic Review, Journal of Political Economy, Quarterly Journal Economics and Review of Economic Studies to name a few. Daron Acemoglu's research covers a wide range of areas within economics, including political economy, economic development and growth, human capital theory, growth theory, technical change, and search theory. Acemoglu is also the editor of the Review of Economics and Statistics, and associate editor of the Journal of Economic Growth.

Abstract of paper presented in this research seminar

This paper develops a model where there is a trade-off between the enforcement of the property rights of different groups. An "oligarchic" society, where political power is in the hands of major producers, protects their property rights, but also tends to erect significant entry barriers, violating the property rights of future producers. Democracy, where political power is more widely diffused, imposes redistributive taxes on the producers, but tends to avoid entry barriers. When taxes in democracy are high and the distortions caused by entry barriers are low, an oligarchic society achieves greater efficiency. Nevertheless, because comparative advantage in entrepreneurship shifts away from the incumbents, the inefficiency created by entry barriers in oligarchy deteriorates over time. The typical pattern is therefore one of the rise and decline of oligarchic societies: of two otherwise identical societies, the one with an oligarchic organization will first become richer, but later fall behind the democratic society. I also discuss how democratic societies may be better able to take advantage of new technologies, how an oligarchic society might transition to democracy because of within-elite conflict, and how the unequal distribution of income in oligarchy supports the oligarchic institutions and may keep them in place even when they become significantly costly to society.

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