Abstract:When property rights are poorly secured, crony relations i.e. the tight connection between the owners of major firms and the government are the primary informal mechanism securing the property. However, this institutional framework creates high entry barriers on markets. We propose a theory that explains why in a democracy the majority of voters may prefer this type of institutions. This paper develops a simple voting model with heterogeneous agents, which differ in their skills and wealth endowment. We show t… Show more
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