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Aggressiveness and Redistribution

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In this paper we deal with voluntary and compulsory redistribution in an economy where the enforcement of property rights is costly. Two agents engage in a common-pool contest and two types of potential distortions arise: the waste of resources in the contest and the dilution of incentives to produce as a result of the existens of externalities in the conflict equilibrium. We were able to show the following results: (i) In some situations Pareto-improving redistribution occurs voluntarily. (ii) Otherwise, the government may choose an indirect way to improve production in the presence of appropriation: In a situation of partial anarchy in some market redistributive policies in other markets may help to reduce the inefficiency in the anarchic market.

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Dieter Bös, Martin Kolmar

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Adapt according to the presented license agreement and reference the original author.