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Karla Hoff, Joseph E. Stiglitz
NBER Working Paper No. 9282*
Issued in October 2002
NBER Program(s): LE
---- Abstract -----
When Russia launched mass privatization, it was widely believed that it would create a powerful constituency for the rule of law. That didn't happen. We present a dynamic equilibrium model of the political demand for the rule of law and show that beneficiaries of mass privatization may fail to demand the rule of law even if it is the Pareto efficient rule of the game.' The reason is that uncertainty about the legal regime can lead to asset stripping, and stripping can give agents an interest in prolonging the absence of the rule of law.
*Published: Hoff, Karla and Joseph E. Stiglitz. "After The Big Bang? Obstacles To The Emergence Of The Rule Of Law In Post-Communist Societies," American Economic Review, 2004, v94(3,Jun), 753-763.
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