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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. 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.
    2. Miller, Steve, 2020. "Causal forest estimation of heterogeneous and time-varying environmental policy effects," Journal of Environmental Economics and Management, Elsevier, vol. 103(C).
    3. 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.
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    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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