After the Big Bang? Obstacles to the emergence of the rule of law in post-communist societies

Hoff, Karla; Stiglitz, Joseph E.

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 not 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.



More About This Work

Academic Units
Department of Economics, Columbia University
Department of Economics Discussion Papers, 0203-03
Published Here
March 23, 2011


September 2002