The price of property rights: Institutions, finance, and economic growth

• 成果类型: Article
• 署名作者: Alquist, Ron; Chabot, Benjamin R.; Yamarthy, Ram
• 署名单位: United States Department of the Treasury; Federal Reserve System - USA; Federal Reserve Bank - Chicago; Office of Financial Research; United States Department of the Treasury
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2022.103594
• 发表日期: 2022
• 关键词: institutions; property rights; cost of capital; Economic growth; financial development

摘要

Using a unique data set of foreign equities traded on the London Stock Exchange (LSE) in the late 19th century, we study the relation between the security of property rights, finance, and growth. We find that British investors demanded a higher equity cost of capital from firms operating in countries with weak property-rights institutions. Further, country-level expropriation risk is negatively related to 19th-century capital flows and present-day economic and financial development. A simple equilibrium model of the protection of investor property rights and risk premia rationalizes these findings. This evidence indicates that institutional quality influences growth, in part, through its effect on the cost of capital and investment. Published by Elsevier B.V.