Governing the Resource: Scarcity-Induced Institutional Change
AbstractWe provide a dynamic model of natural resource management where the optimal institutional structure that governs resource use changes with resource depletion. Copeland and Taylor (2009) analyze how characteristics of a natural resource determine whether its steady-state management regime is open access, communal property, or private property. We extend this and other studies of endogenous institutions to analyze how and when resource governance may change in transition to the steady state, taking into account the fixed costs of institutional change and the variable costs of enforcement and governance. Assuming that governance cost is increasing in the difference between open-access and the actual harvest, we show that open access can be optimal if the resource is abundant relative to its demand and/or if governance costs are high. Once open access is rendered inefficient due to increased resource scarcity, further depletion warrants institutional change. In the face of set-up costs, optimal governance implies non-monotonic resource dynamics. These findings help to explain the co-evolution of resource scarcity and property rights—from open access to common property and beyond. We also extend the Demsetz/Copeland-Taylor theory of price-induced institutional change to include changing scarcity during the transition to the steady state.
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Bibliographic InfoPaper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 201015.
Length: 31 pages
Date of creation: 13 Sep 2010
Date of revision:
Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
- Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-16 (All new papers)
- NEP-ENV-2010-10-16 (Environmental Economics)
- NEP-IPR-2010-10-16 (Intellectual Property Rights)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- de Meza, David & Gould, J R, 1992. "The Social Efficiency of Private Decisions to Enforce Property Rights," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 561-80, June.
- James Roumasset & Christopher Wada, 2012.
"The Economics of Groundwater,"
2012-4, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
- Karl Jandoc & Richard Howitt & James Roumasset & Christopher Wada, 2014. "Institutions for Managing Ground and Surface Water and the Theory of the Second-Best," Working Papers 201415, University of Hawaii at Manoa, Department of Economics.
- Kimberly Burnett & Lee Endress & Majah-Leah Ravago & James Roumasset & Christopher Wada, 2011. "Islands of Sustainability in Time and Space," Working Papers 201112, University of Hawaii at Manoa, Department of Economics.
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