Voracity vs. scale effect in a growing economy without secure property rights

This paper extends the standard model of growth with insecure property rights by introducing variable labor supply and increasing returns to scale. It is assumed that capital stock is jointly owned by multiple interest groups and that each group participates in production activities by supplying its labor force. In this setting, there are two opposing factors that affect growth: over-consumption in the absence of secure property rights and the scale effect due to the presence of increasing returns. The growth performance of the economy thus depends on which factor dominates.