GETTING INSTITUTIONS 'RIGHT' FOR WHOM: CREDIT CONSTRAINTS AND THE IMPACT OF PROPERTY RIGHTS ON THE QUANTITY AND COMPOSITION OF INVESTMENT
The effects of property rights on investment are typically hypothesized to occur through a security-induced investment demand and a collateral-based credit supply. Using a two period model, this paper shows that for farms that are constrained in their access to liquidity, the investment demand effect will itself induce an increase in the endogenous shadow price of liquidity.