IDEAS home Printed from https://ideas.repec.org/p/ags/rffdps/10710.html
   My bibliography  Save this paper

Ownership Risk, Investment, and the Use of Natural Resources

Author

Listed:
  • Bohn, Henning
  • Deacon, Robert T.

Abstract

The effect of insecure ownership on ordinary investment and on the exploitation of natural resources is examined. Insecure ownership is characterized as a positive probability that a typical asset or its future return will be confiscated. For empirical analysis, the probability of confiscation is modeled as a function of observable political attributes of countries, principally the type of government regime in power (democratic versus nondemocratic) and the prevalence of political violence or instability. A general index of ownership security is estimated from the political determinants of economy wide investment rates, and then introduced into models of petroleum and forest use. Ownership risk is found to have a significant, and quantitatively important effect. Empirically, increases in ownership risk are associated with reductions in forest cover and with slower rates of petroleum exploration. Contrary to conventional wisdom, greater ownership risk tends to slow rates of petroleum extraction, apparently because the extraction process is capital intensive.

Suggested Citation

  • Bohn, Henning & Deacon, Robert T., 1997. "Ownership Risk, Investment, and the Use of Natural Resources," Discussion Papers 10710, Resources for the Future.
    • Handle: RePEc:ags:rffdps:10710
    as

    Download full text from publisher

    File URL: http://ageconsearch.umn.edu/record/10710/files/dp970020.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lopez Ramon, 1994. "The Environment as a Factor of Production: The Effects of Economic Growth and Trade Liberalization," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 163-184, September.
    2. Martin C. McGuire & Mancur Olson Jr., 1996. "The Economics of Autocracy and Majority Rule: The Invisible Hand and the Use of Force," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 72-96, March.
    3. Chichilnisky, Graciela, 1994. "North-South Trade and the Global Environment," American Economic Review, American Economic Association, vol. 84(4), pages 851-874, September.
    4. Robert T. Deacon, 1994. "Deforestation and the Rule of Law in a Cross-Section of Countries," Land Economics, University of Wisconsin Press, vol. 70(4), pages 414-430.
    5. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 407-443.
    6. Gene M. Grossman & Alan B. Krueger, 1991. "Environmental Impacts of a North American Free Trade Agreement," NBER Working Papers 3914, National Bureau of Economic Research, Inc.
    7. Farzin, Y Hossein, 1984. "The Effect of the Discount Rate on Depletion of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 92(5), pages 841-851, October.
    8. Grier, Kevin B. & Tullock, Gordon, 1989. "An empirical analysis of cross-national economic growth, 1951-1980," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 259-276, September.
    9. Selden Thomas M. & Song Daqing, 1994. "Environmental Quality and Development: Is There a Kuznets Curve for Air Pollution Emissions?," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 147-162, September.
    10. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
    11. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
    12. Easterly, William & Rebelo, Sergio, 1993. "Fiscal policy and economic growth: An empirical investigation," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 417-458, December.
    13. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March.
    14. Edwards, Sebastian, 1998. "Openness, Productivity and Growth: What Do We Really Know?," Economic Journal, Royal Economic Society, vol. 108(447), pages 383-398, March.
    15. Robert Summers & Alan Heston, 1991. "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950–1988," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 327-368.
    16. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-963, September.
    17. Alston, Lee J & Libecap, Gary D & Schneider, Robert, 1996. "The Determinants and Impact of Property Rights: Land Titles on the Brazilian Frontier," Journal of Law, Economics, and Organization, Oxford University Press, vol. 12(1), pages 25-61, April.
    18. Mendelsohn, Robert, 1994. "Property Rights and Tropical Deforestation," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 750-756, Supplemen.
    19. Cropper, Maureen & Griffiths, Charles, 1994. "The Interaction of Population Growth and Environmental Quality," American Economic Review, American Economic Association, vol. 84(2), pages 250-254, May.
    20. Shafik, Nemat & Bandyopadhyay, Sushenjit, 1992. "Economic growth and environmental quality : time series and cross-country evidence," Policy Research Working Paper Series 904, The World Bank.
    21. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
    22. repec:cup:apsrev:v:87:y:1993:i:03:p:567-576_10 is not listed on IDEAS
    23. Long, Ngo Van, 1975. "Resource extraction under the uncertainty about possible nationalization," Journal of Economic Theory, Elsevier, vol. 10(1), pages 42-53, February.
    24. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-247, February.
    25. Southgate, Douglas & Sierra, Rodrigo & Brown, Lawrence, 1991. "The causes of tropical deforestation in Ecuador: A statistical analysis," World Development, Elsevier, vol. 19(9), pages 1145-1151, September.
    26. Lasserre, P., 1982. "Exhaustible-Resource Extraction with Capital," Cahiers de recherche 8208, Universite de Montreal, Departement de sciences economiques.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Resource /Energy Economics and Policy;

    JEL classification:

    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:rffdps:10710. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search). General contact details of provider: http://edirc.repec.org/data/rffffus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.