Better Safe than Sorry: How Property Rights and Veto Players Jointly Affect Economic Growth

Institutional interactions and economic growth: the joint effects of property rights, veto players and democratic capital

“…We consider this question by, first, presenting the standard arguments for why property rights are important for economic growth, and the divergent views on the effects separation of powers 3 (section 2). But, what is more important, we suggest-in line with the arguments of Melton (2013) and Justesen (2014)-that property rights matter for economic growth mainly in institutional contexts wherein political power is divided among a number of political actors. Such arrangements work as formal mechanisms that affect the ability of governments to change existing property rights at some point in the future and, while a system of checks-and-balances need not directly affect the "strength" or "quality" of property rights, it does affect their credibility.…”

“…In the other, political power is widely and effectively dispersed but property rights not well protected: In this case the insecure property rights are, so to speak, "locked in", because predatory veto players will be able to block changes that would have made property rights more secure. It seems plausible to suggest that these latter environments will be less conducive to economic growth than the first mentioned scenario, but at least marginally more so than the second scenario (Justesen 2014). In other words, we get a relation that looks as follows with respect to whether property rights are secure or insecure and the separation of powers strong or weak:…”

“…Viewed in this way, political institutions with veto players may therefore work as a conditioning variable that will moderate the links between property rights and economic growth. In reality then, it is the interaction between veto players and property rights that matters for economic growth, rather than either one in isolation (Justesen 2014 We have written above of veto players in the abstract, but in practice they may come in different forms (Tsebelis 1995). Two types of veto players can be identified: institutional veto players, explicitly defined by a formal constitutional arrangement, e.g., a president and one or more legislative chambers whose assent is necessary for laws to be enacted and signed into law, courts with the power of judicial review, binding referendums and so on, all comprising a formal system of checks and balances.…”

“…The statistical analyses with regard to institutional interactions (section 3.2) and democratic capital (section 3.3) are presented next. Relative to prior work (Justesen 2014;cf. Justesen and Kurrild-Klitgaard 2007), this paper makes the following contributions to the literature.…”

GROWTH, INEQUALITY, AND ECONOMIC FREEDOM: EVIDENCE FROM THE U.S. STATES

“…The heterogeneity is echoed by a growing cross‐country literature that argues that the effects of EF on growth are conditional on other institutional features (cf. Justesen ; Justesen and Kurrild‐Klitgaard ). A similar pattern arises in the literature on inequality and growth.…”