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The commons with capital markets

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Author Info
Colin Rowat (University of Birmingham)
Jayasri Dutta (University of Birmingham)

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Abstract

We explore commons problems when agents have access to capital markets. The commons has a high intrinsic rate of return but its fruits cannot be secured by individual agents. Resources transferred to the capital market earn lower returns, but are secure. In a two period model, we assess the consequences of market access for the commons' survival and welfare; we compare strategic and competitive equilibria. Market access generally speeds extinction, with negative welfare consequences. Against this, it allows intertemporal smoothing, a positive effect. In societies in which the former effect dominates, market liberalisation may be harmful. We reproduce the multiple equilibria found in other models of competitive agents; when agents are strategic, extinction dates are unique. Strategic agents generally earn their surplus by delaying the commons' extinction; in unusual cases, strategic agents behave as competitive ones even when their numbers are small.

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Paper provided by EconWPA in its series GE, Growth, Math methods with number 0412002.

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Length: 30 pages
Date of creation: 21 Dec 2004
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Handle: RePEc:wpa:wuwpge:0412002

Note: Type of Document - pdf; pages: 30. Department of Economics, University of Birmingham working paper 05-01
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Web page: http://129.3.20.41

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Related research
Keywords: commons; capital markets; Washington Consensus; property rights;

Other versions of this item:

Find related papers by JEL classification:
C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply (the Commons)

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References listed on IDEAS
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