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Distributional Effects of the Transition to Property Rights for a Common-Pool Resource

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  • Corbett A. Grainger
  • Christopher Costello

Abstract

The introduction of property rights to manage common-pool resources is often met with opposition from some incumbent users, despite evidence of large aggregate increases in resource rent. We introduce an analytical model with firm heterogeneity to distinguish between traditional resource rent, which accrues to all owners, and inframarginal rent, which accrues to those with high skill. We show that, in the presence of skill heterogeneity, some current users (namely those with the highest skill) may prefer common-pool management, despite large aggregate increases in rents due to rationalization. Whether the transition to property rights is Pareto improving hinges critically on the initial allocation of rights, because inframarginal rents may be lower under property rights than limited entry. In our application to an important US fishery, property rights generate a ten-fold increase in market capitalization and a doubling in the present value of the resource, but without substantial free grandfathering, the top harvesters would rationally oppose the transition to property rights.

Suggested Citation

  • 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.
  • Handle: RePEc:ucp:mresec:doi:10.1086/684132
    DOI: 10.1086/684132
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    References listed on IDEAS

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    1. Sigbjorn Tveteras & Carlos Paredes & Julio Peña, 2011. "Individual Fishing Quotas in Peru: Stopping the Race for Anchovies," ILADES-UAH Working Papers inv263, Universidad Alberto Hurtado/School of Economics and Business.
    2. Matthew N. Reimer & Joshua K. Abbott & James E. Wilen, 2014. "Unraveling the Multiple Margins of Rent Generation from Individual Transferable Quotas," Land Economics, University of Wisconsin Press, vol. 90(3), pages 538-559.
    3. 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.
    4. Coglan, Louisa & Pascoe, Sean, 1999. "Separating Resource Rents From Intra-Marginal Rents In Fisheries' Economic Survey Data," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 28(2), pages 1-10, October.
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    Cited by:

    1. Ayres, Andrew B. & Edwards, Eric C. & Libecap, Gary D., 2018. "How transaction costs obstruct collective action: The case of California's groundwater," Journal of Environmental Economics and Management, Elsevier, vol. 91(C), pages 46-65.
    2. Andrew B. Ayres & Eric C. Edwards & Gary D. Libecap, 2017. "How Transaction Costs Obstruct Collective Action: Evidence from California’s Groundwater," NBER Working Papers 23382, National Bureau of Economic Research, Inc.
    3. Bayramoglu, Basak & Copeland, Brian R. & Jacques, Jean-Francois, 2018. "Trade and fisheries subsidies," Journal of International Economics, Elsevier, vol. 112(C), pages 13-32.
    4. 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.
    5. Buckley, R.C. & Guitart, D. & Shakeela, A., 2017. "Contested surf tourism resources in the Maldives," Annals of Tourism Research, Elsevier, vol. 64(C), pages 185-199.
    6. Jennifer A. Martin & Summer Gray & Eréndira Aceves-Bueno & Peter Alagona & Tammy L. Elwell & Angela Garcia & Zach Horton & David Lopez-Carr & Jessica Marter-Kenyon & Karly Marie Miller & Christopher S, 2019. "What is marine justice?," Journal of Environmental Studies and Sciences, Springer;Association of Environmental Studies and Sciences, vol. 9(2), pages 234-243, June.

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