Political Economy Seminar - Martin Beraja

Much of human progress comes from innovations that expand the frontier of usable resources. A distinctive feature of resources outside the frontier is that property rights are poorly defined. In important historical cases, we document that innovators appropriated such resources in anticipation of extraordinary rents, triggering conflicts with counterparties. These observations do not fit neatly into existing frameworks in which property rights precede innovation, appropriation is purely redistributive, or monopoly rents sustain economic growth. Motivated by these observations, we present a model of growth at the resource frontier that minimally departs from traditional models of expanding varieties. The model rationalizes how property rights emerge as a consequence of innovation, establishes that appropriation rents can incentivize innovation, and ultimately shows that economic growth at the resource frontier frequently comes together with appropriation and conflict.