Crime,Confiscation, and Frowth: For and Against Leviathan

This paper presents a dynamic general equilibrium model ofrent seeking in which the payoffs and the choices between productiveand non-productive activity are endogenous. The economy has the potential for endogenous growth, but when agents can choose between confiscation and productive investment, growth is no longer possible. The confiscation activity has multiple interpretations.In one, confiscation occurs as a result of theft;the lack of sufficient property rights eventually makesinvestment in productive activity unpalatable.Alternatively, confiscation is the result ofgovernment activity (e.g., taxation). The paper underlines the difficulty of creating aninstitutional structure conducive to growth.