This paper presents a growth model in which property rights are insecure and
costly to enforce. Losses of property provide the impetus to establish
institutions which seek to enforce property rights. Institutions are shown
to implement policies that enforce property rights. The model establishes
that economies in which the institutional structure does not adequately
protect property rights grow slowly, or not at all, while countries with
better property rights protection grow in accordance with the standard
neoclassical model. Because income inequality is a primary incentive to
violate another’s property rights, the model also provides a positive theory
of income redistribution. Empirical tests of the model’s predictions
demonstrates that government expenditures that enforce property rights raise
per capita income growth.