Power, Property Rights, and the Dynamics of Local Wealth Appropriation

This paper examines the dynamic connections between local wealth inequality and the local politics of property rights within a federal system. We model a jurisdiction comprising a politically dominant in-group and a marginalized out-group. At each date, the jurisdiction tries to redistribute claims on productive assets. The out-group can legally challenge any changes to the status quo by appealing to its due process rights of possession (ROP). Nevertheless, the jurisdiction exploits weaknesses in the legal system to systematically redistribute property claims away from the out-group and toward the in-group. It combines takings and zoning restrictions with the leveraging of public assets to deter legal challenges. We examine how this leverage varies across time and depends on status quo effects and legal prioritization of certain assets. Our results provide a localized political economy explanation for systemic wealth disparities in the U.S