Governance and growth

Because of its inappropriability, protection of property rights is widely recognized as being the state's responsibility. Moreover, recent empirical evidence suggests that it leads to higher investment levels and faster growth. Nevertheless, the extent of property rights protection differs significantly across countries. This paper endogenizes the emergence of property rights within a simple growth framework. Drawing on North, (North, D., 1990, Institutions, Institutional Change and Economic Performance, Cambridge University Press), a model is presented where economic performance and enforcement of property rights may reinforce each other. Initial conditions determine the economy's convergence to a high-income or a low-income steady state. The existing empirical evidence offers a tentative support for this theory.