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Acemoglu et al. (2001) Property Rights investor faces stochastic trading opportunities and improvements in rights are modelled as reductions in transaction costs - so there is more land trading after rights are improved rights to sell and buy land - important rights in explaining invest- ment 3. Collateral and Credit Markets has an indirect beneFt assume two things (i) improvements in land rights – encourage lenders to recognise land as collateral (ii) borrowers are dependent on access to credit for their investment in the land two ways that land rights can be linked to investments (i) in competitive credit market without information problems, im-
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Unformatted text preview: proved access to collateral reduces the risk premium on lending and thus, reduces the cost of borrowing (interest rate) faced by the borrower – this can encourage investment (ii) with credit market imperfections – collateral can reduce agency problems – can improve access to credit, for example, by reduc-ing credit rationing – encourage investment 4.1 Acemoglu et al. (2001) Colonial Origins of Comparative Development In places where Europeans could not settle due to high mortality, they were more likely to set up extractive institutions Development Economics, LSE Summer School 2007 64...
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