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Natural-Resource Exploitation with Costly Enforcement of Property Rights

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Author Info

  • HOTTE, Louis

Abstract

This paper proposes a model of natural-resource exploitation when private ownership requires costly enforcement activities. For a given wage rate, it is shown how enforcement costs can increase with labor's average productivity on a resource site. As a result, it is never optimal for the site owner to produce at the point where marginal productivity equals the wage rate. It may even be optimal to exploit at a point exhibiting negative marginal returns. An important parameter in the analysis is the prevailing wage rate. When wages are low, further decreases in the wage rates can reduce the returns from resource exploitation. At sufficiently low wages, positive returns can be rendered impossible to achieve and the site is abandoned to a free-access exploitation. The analysis provides some clues as to why property rights may be more difficult to delineate in less developed countries. It proposes a different framework from which to address normative issues such as the desirability of free trade with endogenous enforcement costs, the optimality of private decisions to enforce property rights, the effect of income distribution on property rights enforceability, etc.

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File URL: http://hdl.handle.net/1866/480
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Bibliographic Info

Paper provided by Universite de Montreal, Departement de sciences economiques in its series Cahiers de recherche with number 9720.

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Date of creation: 1997
Date of revision:
Handle: RePEc:mtl:montde:9720

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Related research

Keywords: orty rights; enforcement costs; natural resources; income levels; economic develoent; economics of crime; illegal labor;

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References

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  1. Field, Barry C, 1989. "The Evolution of Property Rights," Kyklos, Wiley Blackwell, vol. 42(3), pages 319-45.
  2. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169.
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  13. Clarke, Harry R. & Reed, William J. & Shrestha, Ram M., 1993. "Optimal enforcement of property rights on developing country forests subject to illegal logging," Resource and Energy Economics, Elsevier, vol. 15(3), pages 271-293, September.
  14. George J. Stigler, 1974. "The Optimum Enforcement of Laws," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 55-67 National Bureau of Economic Research, Inc.
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  17. Helsley, Robert W. & Strange, William C., 1994. "Exclusion and the private enforcement of property rights," Journal of Public Economics, Elsevier, vol. 53(2), pages 291-308, February.
  18. Brooks, R. & Controneo, J. & Murray, M. & Salant, S., 1995. "When is the Standard Analysis of Common Property Extraction Under Free Access Correct? -- A Game - Theoretic Justification for Non Game-Theoretic Analyses," Papers 95-10, Michigan - Center for Research on Economic & Social Theory.
  19. Cohen, Jon S. & Weitzman, Martin L., 1975. "A Marxian model of enclosures," Journal of Development Economics, Elsevier, vol. 1(4), pages 287-336, November.
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Citations

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Cited by:
  1. Hotte, Louis, 2001. "Conflicts over property rights and natural-resource exploitation at the frontier," Journal of Development Economics, Elsevier, vol. 66(1), pages 1-21, October.
  2. Max Iván Aladave Ruiz & Cecilia Garcìa-Peñalosa, 2008. "Education, Corruption and the Natural Resource Curse," Working Papers halshs-00340997, HAL.
  3. Louis Hotte & Randy McFerrin & Douglas Wills, 2011. "On the Dual Nature of Weak Property Rights," Working Papers 1103E, University of Ottawa, Department of Economics.
  4. Frederick Van der Ploeg & Dominic Rohner, 2010. "War and Natural Resource Exploitation," CESifo Working Paper Series 3244, CESifo Group Munich.
  5. Hotte, Louis & Long, Ngo Van & Tian, Huilan, 2000. "International trade with endogenous enforcement of property rights," Journal of Development Economics, Elsevier, vol. 62(1), pages 25-54, June.
  6. Ollivier, Hélène, 2012. "Growth, deforestation and the efficiency of the REDD mechanism," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 312-327.
  7. Henri Atangana ondoa, 2014. "The determinants of corporate corruption in Cameroon," Economics Bulletin, AccessEcon, vol. 34(2), pages 938-950.

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