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Property Rights, Public Enforcement, and Growth


  • The present paper is a revised version of our working paper (Irmen and Kuehnel, 2011). We are grateful to an anonymous referee for two outstanding reports.


We study the link between public enforcement of property rights, innovation investments, and economic growth in an endogenous growth framework with an expanding set of product varieties. We find that a government can assure positive equilibrium growth through public employment in the enforcement of property rights, if the economic environment is sufficiently favorable to growth and/or if public enforcement is sufficiently effective. However, in terms of welfare, an equilibrium path without property-rights protection and growth might be preferable. In this case, the enforcement of property rights involves too much reallocation of labor from production and research towards the public sector.