TY  - JOUR
AU  - Hoff,Karla
AU  - Stiglitz,Joseph E.
TI  - The Creation of the Rule of Law and the Legitimacy of Property Rights: The Political and Economic Consequences of a Corrupt Privatization
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11772
PY  - 2005
Y2  - November 2005
UR  - http://www.nber.org/papers/w11772
L1  - http://www.nber.org/papers/w11772.pdf
N1  - Author contact info:
Karla Hoff
World Bank
MC 3-301
1818 H St NW
Washington DC 20433
Tel: 240 413 2758
E-Mail: khoff@worldbank.org

Joseph E. Stiglitz
Uris Hall, Columbia University
3022 Broadway, Room 814
New York, NY  10027
Tel: 212/854-0671
Fax: 212/662-8474
E-Mail: jes322@columbia.edu
AB  - How does the lack of legitimacy of property rights affect the dynamics of the creation of the rule of law? We investigate the demand for the rule of law in post-Communist economies after privatization under the assumption that theft is possible, that those who have "stolen" assets cannot be fully protected under a change in the legal regime towards rule of law, and that the number of agents with control rights over assets is large. We show that a demand for broadly beneficial legal reform may not emerge because the expectation of weak legal institutions increases the expected relative return to stripping assets, and strippers may gain from a weak and corrupt state. The outcome can be inefficient even from the narrow perspective of the asset-strippers.
ER  -