Ownership risk and the use of common-pool natural resources
AbstractIt has long been recognized that the quality of property rights greatly impacts the economic development of a country and the use of its natural resources. Since Long , the conventional wisdom has been that ownership risk induces a firm to overuse the stock of a resource. However, the empirical evidence is mixed. In particular, Bohn and Deacon  find that weak property rights have an ambiguous effect on present extraction. We provide a theoretical model supporting these mixed observations in a common-pool resource environment. We show that if ownership risk includes a risk of expropriation in which the identities of the excluded firms are unknown ex ante, then the present extraction of all firms may decrease along with a higher risk of expropriation. The elasticity of demand for the resource is key in explaining the effect of ownership risk on present extraction.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Environmental Economics and Management.
Volume (Year): 63 (2012)
Issue (Month): 2 ()
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Web page: http://www.elsevier.com/locate/inca/622870
Common-pool resource; Expropriation; Extraction behavior; Ownership risk; Property rights; Tragedy of the commons;
Other versions of this item:
- Jérémy LAURENT-LUCCHETTI & Marc SANTUGINI, 2010. "Ownership Risk and the Use of Common-Pool Natural Resources," Cahiers de recherche 10-03, HEC Montréal, Institut d'économie appliquée, revised May 2011.
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
- Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
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