Property Rights, Public Enforcement, and Growth

We study the link between public enforcement of property rights, innovation investments,
and economic growth in an endogenous growth framework with an expanding set of
product varieties. We find that a government may assure positive equilibrium growth
through public employment in the enforcement of property rights, if the economic
environment is sufficiently favorable to growth and/or public enforcement is sufficiently
effective. However, in terms of welfare an equilibrium path without property rights
protection and growth might be preferable. In this case the enforcement of property
rights involves too much reallocation of labor from production and research towards the
public sector.