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Property Rights, Regulatory Capture, and Exploitation of Natural Resources

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  • Christopher Costello
  • Corbett A. Grainger

Abstract

We study how the strength of property rights to individual extractive firms affects a regulator’s choice over exploitation rates for a natural resource. The regulator is modeled as an intermediary between current and future resource harvesters rather than between producers and consumers, as in the traditional regulatory capture paradigm. When incumbent resource users have weak property rights, they have an incentive to pressure the regulator to allow resource extraction at an inefficiently rapid rate. The main theoretical prediction—that stronger individual property rights will lead the regulator to choose more economically efficient extraction paths—is tested empirically with novel panel data from global fisheries. Exploiting the variation in timing of Catch Share implementation, as well as employing an instrumental variables strategy, we find that regulators are significantly more conservative in managing resources for which firms have strong property rights; this is especially pronounced for resources that have been historically overexploited.

Suggested Citation

  • Christopher Costello & Corbett A. Grainger, 2018. "Property Rights, Regulatory Capture, and Exploitation of Natural Resources," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 5(2), pages 441-479.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/695612
    DOI: 10.1086/695612
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    Cited by:

    1. Isa Olalekan Elegbede & Kafayat A. Fakoya & Morenike A. Adewolu & Toheeb Lekan Jolaosho & Joseph Adewale Adebayo & Esther Oshodi & Ruth Funmilola Hungevu & Amos Olayinka Oladosu & Oluwatoyosi Abikoye, 2025. "Understanding the social–ecological systems of non-state seafood sustainability scheme in the blue economy," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(2), pages 2721-2752, February.
    2. Corbett A. Grainger & Christopher Costello, 2016. "Distributional Effects of the Transition to Property Rights for a Common-Pool Resource," Marine Resource Economics, University of Chicago Press, vol. 31(1), pages 1-26.
    3. Holzer, Jorge & DePiper, Geret & Brooks, Elizabeth N., 2025. "Observability and stakeholder conflict in resources management," Resource and Energy Economics, Elsevier, vol. 81(C).
    4. Timothy Fitzgerald, 2024. "Regulatory capture in a resource boom," Public Choice, Springer, vol. 198(1), pages 93-127, January.
    5. Miller, Steve, 2020. "Causal forest estimation of heterogeneous and time-varying environmental policy effects," Journal of Environmental Economics and Management, Elsevier, vol. 103(C).
    6. Lingling Hou & Pengfei Liu & Xiaohui Tian, 2023. "Grassland tenure reform and grassland quality in China," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(5), pages 1388-1404, October.
    7. Holzer, Jorge & McConnell, Kenneth, 2023. "Extraction rights allocation with liquidity constraints," Resource and Energy Economics, Elsevier, vol. 71(C).
    8. Martin F. Quaas & Max T. Stoeven & Bernd Klauer & Thomas Petersen & Johannes Schiller, 2018. "Windows of Opportunity for Sustainable Fisheries Management: The Case of Eastern Baltic Cod," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 70(2), pages 323-341, June.
    9. Eric C. Edwards & Nathan P. Hendricks & Gabriel S. Sampson, 2025. "The capitalization of property rights to groundwater," American Journal of Agricultural Economics, John Wiley & Sons, vol. 107(2), pages 390-410, March.
    10. Stahn, Hubert, 2026. "Voluntary management of fisheries under the threat of uncertain legislation," Ecological Economics, Elsevier, vol. 239(C).
    11. Riekhof, Marie-Catherine & Noack, Frederik, 2024. "Nature’s decline and recovery — Structural change, regulatory costs, and the onset of resource use regulation," Journal of Environmental Economics and Management, Elsevier, vol. 125(C).
    12. Isaksen, Elisabeth Thuestad & Richter, Andries, 2019. "Tragedy, property rights, and the commons: investigating the causal relationship from institutions to ecosystem collapse," LSE Research Online Documents on Economics 90606, London School of Economics and Political Science, LSE Library.

    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery

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