Legal Protection of Property Rights: A Dynamic Evolution Model

This paper analyses a dynamic evolution model of institutions, where the security of property rights
is affected by coercive capacity, political power, legal quality, and private protection. Since they are endogenously determined in equilibrium, the legal quality can be used as a summary indicator of property security. The main result suggests the legal protection of property rights increases over time mainly because the economy's vulnerability to expropriation declines as a result of arising importance of commercial and industrial activities as compared to agriculture. The rule of law and a strong government coexist only when the common people are capable of defending themselves collectively against state predation. The main predictions are consistent with broad historical evidence.