We present a simple model to analyze law enforcement problems in transition economies. Law enforcement implies coordination problems and multiplicity of equilibria due to a law abidance and a fiscal externality. We analyze two institutional mechanisms for solving the coordination problem. A...

This paper analyzes how political institutions, wealth distribution and economic activities affect each other during the process of development. A simple general equilibrium model of rent-seeking political elites with two productive sectors (modern and traditional) is presented.

We consider an economy where property rights are necessary to ensure sufficient rewards to ex ante investments. Because enforcement of property rights influences the ex post distribution of rents there is room for corruption. We characterize the optimal organization of society and the optimal...