This paper develops an economic rationalization of the ‘shift from government to governance’ by employing the logic of the property rights theory of the firm. Rural governance is defined as being based on the equal assignment of property rights and is hypothesized as being preferred by rural stakeholders in those cases where the stakeholders' interests are significantly common. This theoretical argument has been confirmed by an empirical analysis of rural governance in Ukraine through a survey of members of various rural cooperatives in the Kiev region.
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