Economic Theory

, Volume 68, Issue 3, pp 701–735 | Cite as

Property rights enforcement with unverifiable incomes

  • Jan U. AuerbachEmail author
Research Article


I study the extent of secure property rights a planner can implement. Agents can produce output, appropriate others’ output, or work in property rights enforcement. The planner pays enforcement personnel using taxes collected from producers who can hide income from taxation at a cost. The planner implements perfectly secure property rights by incentivizing production through redistributive taxation and absorbing potential appropriators as enforcement personnel. Both taxation and employment in enforcement institutionalize redistribution that would otherwise take place through appropriation. Higher costs of hiding income permit more redistributive taxation and less enforcement, leading to more production and higher welfare.


Costly falsification Institutions Property rights Enforcement 

JEL Classification

O17 P14 


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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.University of Exeter Business SchoolExeterUK

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