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Commons as Insurance and the Welfare Impact of Privatization

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  • Jean-Marie Baland
  • Patrick Francois

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Abstract

It is shown here that despite the efficiency gains from privatization, when markets are incomplete, all individuals may be made worse off by privatization, even when the resource is equitably privatized. Such market incompleteness is common in the developing world and can explain the often encountered resistance to efficiency enhancing privatizing reforms, especially in the case of village level landholdings and forests. The advantage of commonly held property arises because of its superior insurance properties (which tend to provide income maintenance in low states). Sufficient conditions are established under which any feasible insurance scheme under private property cannot ex ante Pareto dominate allocations under the commons.

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Bibliographic Info

Paper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 03/069.

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Length: 26 pages
Date of creation: Mar 2003
Date of revision:
Handle: RePEc:bri:cmpowp:03/069

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Keywords: common property; privatisation; insurance;

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References

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  1. Subhrendu K. Pattanayak & Erin O. Sills, 2001. "Do Tropical Forests Provide Natural Insurance? The Microeconomics of Non-Timber Forest Product Collection in the Brazilian Amazon," Land Economics, University of Wisconsin Press, vol. 77(4), pages 595-612.
  2. Baland, Jean-Marie & Platteau, Jean-Philippe, 2000. "Halting Degradation of Natural Resources: Is There a Role for Rural Communities?," OUP Catalogue, Oxford University Press, number 9780198290612.
  3. Cohen, Jon S. & Weitzman, Martin L., 1975. "A Marxian model of enclosures," Journal of Development Economics, Elsevier, vol. 1(4), pages 287-336, November.
  4. Wilson, Paul N & Thompson, Gary D, 1993. "Common Property and Uncertainty: Compensating Coalitions by Mexico's Patoral Ejidatarios," Economic Development and Cultural Change, University of Chicago Press, vol. 41(2), pages 299-318, January.
  5. Brito, Dagobert L. & Intriligator, Michael D. & Sheshinski, Eytan, 1997. "Privatization and the distribution of income in the commons," Journal of Public Economics, Elsevier, vol. 64(2), pages 181-205, May.
  6. de Meza, David & Gould, J. R., 1985. "Free access vs private ownership: A comparison," Journal of Economic Theory, Elsevier, vol. 36(2), pages 387-391, August.
  7. De Meza, David & Gould, J R, 1987. "Free Access versus Private Property in a Resource: Income Distributions Compared," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1317-25, December.
  8. Bromley, Daniel W & Chavas, Jean-Paul, 1989. "On Risk, Transactions, and Economic Development in the Semiarid Tropics," Economic Development and Cultural Change, University of Chicago Press, vol. 37(4), pages 719-36, July.
  9. Das Gupta, Monica, 1987. "Informal Security Mechanisms and Population Retention in Rural India," Economic Development and Cultural Change, University of Chicago Press, vol. 36(1), pages 101-20, October.
  10. Humphries, Jane, 1990. "Enclosures, Common Rights, and Women: The Proletarianization of Families in the Late Eighteenth and Early Nineteenth Centuries," The Journal of Economic History, Cambridge University Press, vol. 50(01), pages 17-42, March.
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Cited by:
  1. James Fenske, 2012. "Imachi Nkwu: Trade and the commons," CSAE Working Paper Series 2012-19, Centre for the Study of African Economies, University of Oxford.
  2. Ambec, Stefan & Sebi, Carine, 2010. "The distributional impact of common-pool resource regulations," LERNA Working Papers 10.19.325, LERNA, University of Toulouse.
  3. Philippe Delacote, 2008. "The Safety-net Use of Non Timber Forest Products," Working Papers - Cahiers du LEF 2008-04, Laboratoire d'Economie Forestiere, AgroParisTech-INRA.
  4. Albers, H.J. & Robinson, E.J.Z., 2013. "A review of the spatial economics of non-timber forest product extraction: Implications for policy," Ecological Economics, Elsevier, vol. 92(C), pages 87-95.
  5. Ali, Daniel Ayalew & Deininger, Klaus & Goldstein, Markus, 2011. "Environmental and gender impacts of land tenure regularization in Africa : pilot evidence from Rwanda," Policy Research Working Paper Series 5765, The World Bank.
  6. Arghya Ghosh & Partha Sen, 2008. "Privatization in a Small Open Economy with Imperfect Competition," Discussion Papers 2008-21, School of Economics, The University of New South Wales.
  7. Alice Nicole Sindzingre, 2007. "Poverty traps: a perspective from development economics," EconomiX Working Papers 2007-26, University of Paris West - Nanterre la Défense, EconomiX.
  8. World Bank, 2007. "Poverty and Environment : Understanding Linkages at the Household Level," World Bank Other Operational Studies 7744, The World Bank.
  9. World Bank, 2007. "Poverty and Environment : Understanding Linkages at the Household Level," World Bank Publications, The World Bank, number 6924, January.
  10. Deininger, Klaus, 2010. "Towards sustainable systems of land administration: Recent evidence and challenges for Africa," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 5(1), September.
  11. Takasaki, Yoshito, 2011. "Do the Commons Help Augment Mutual Insurance Among the Poor?," World Development, Elsevier, vol. 39(3), pages 429-438, March.
  12. Ayalew Ali, Daniel & Goldstein, Markus, 2011. "Environmental and Gender Impacts of Land Tenure Regularization in Africa," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  13. Platteau, Jean-Philippe, 2002. "The Gradual Erosion of the Social Security Function of Customary Land Tenure Arrangements in Lineage-Based Societies," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  14. Jean-Michel Salles, 2011. "Valuing biodiversity and ecosystem services: why linking economic values with Nature?," Working Papers 11-24, LAMETA, Universtiy of Montpellier, revised Dec 2011.

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