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Anticipatory Effects of Regulation in Open Access

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  • Bruno, Ellen Marie
  • Hagerty, Nick

Abstract

We study the regulation of open-access resources under long implementation horizons. Our theoretical model clarifies when and how future regulation creates either an anticipatory decline or perverse incentives to accelerate extraction (a "Green Paradox'"). Then, we evaluate the early effects of a major groundwater regulation in California that does not yet bind. We assemble new data and compare within pairs of neighboring agencies that face varying restrictions on extraction. Differences in future regulation do not affect measures of water-intensive investments or groundwater extraction today. The absence of anticipatory response in either direction can be explained by high private discount rates.

Suggested Citation

  • Bruno, Ellen Marie & Hagerty, Nick, 2023. "Anticipatory Effects of Regulation in Open Access," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt58n467v5, Department of Agricultural & Resource Economics, UC Berkeley.
    • Handle: RePEc:cdl:agrebk:qt58n467v5
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