The 'Washington Consensus' development policies include liberalising markets and strengthening property rights.  Liberalising markets requires largely that a government relax existing controls. Strengthening property rights, however, may require expanded
government capacity.  Thus, a country implementing Consensus reforms may liberalise
capital markets, but leave property rights weak.  Is this country better off than it would have been without reforms?

Our existing research addressed this question in the analytically simple case of no property rights.  We found that access to international capital markets had a positive and a negative effect: it allowed more efficient allocation of resources over time, but encouraged capital
flight from the country with weak property rights into, for example, foreign bank accounts.  In transferring resources from poor, capital scarce societies to richer, capital abundant ones, this is inefficient.

This grant allows us to extend this research to cases in which property rights are merely weak - everything between perfect property rights (economic analysis' traditional domain) and entirely absent rights. The resulting richer theory will allow better engagement with empirical research (which uses gradated measures of property rights' strength) and
the policy debate on financial market liberalisation and capital mobility.


Start date
31 March 2005
End date
30 March 2009
Grant holder
Dr Colin Rowat
Professor Jayasri Dutta
Grant amount
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Grant type