Does Inequality Lead To Greater Efficiency In The Use Of Local Commons? The Role Of Strategic Investments In Capacity
This paper examines the impact of inequality in access to credit on efficiency in extraction from a common resource. A dynamic model is developed, where agents strategically choose the level of sunk capacity and the consequent extraction path. Sunk capacity is a function of cost of credit and serves as a commitment device to deter entry or force exit. Contrary to previous studies based on static settings, our results show that greater inequality does not necessarily lead to greater efficiency in extraction. In particular, we show that under moderate inequality, the resource stock is lower than that under perfect equality.
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- Dayton-Johnson, Jeff & Bardhan, Pranab, 1996.
"Inequality and Conservation on the Local Commons: A Theoretical Exercise,"
Center for International and Development Economics Research, Working Paper Series
qt7f9913w9, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
- Jeff Dayton-Johnson & Pranab Bardhan, 2002. "Inequality And Conservation On The Local Commons: A Theoretical Exercise," Economic Journal, Royal Economic Society, vol. 112(481), pages 577-602, July.
- Jeff Dayton-Johnson and Pranab Bardhan., 1996. "Inequality and Conservation on the Local Commons: A Theoretical Exercise," Center for International and Development Economics Research (CIDER) Working Papers C96-071, University of California at Berkeley.
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The Warwick Economics Research Paper Series (TWERPS)
140, University of Warwick, Department of Economics.
- Pranab Bardhan., 1993. "Rational Fools and Cooperation in a Poor Hydraulic Economy," Center for International and Development Economics Research (CIDER) Working Papers C93-015, University of California at Berkeley.
- Provencher Bill & Burt Oscar, 1993. "The Externalities Associated with the Common Property Exploitation of Groundwater," Journal of Environmental Economics and Management, Elsevier, vol. 24(2), pages 139-158, March.
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- Baland, Jean-Marie & Platteau, Jean-Philippe, 1998. "Wealth Inequality and Efficiency in the Commons, Part II: The Regulated Case," Oxford Economic Papers, Oxford University Press, vol. 50(1), pages 1-22, January.
- Baland, J.M. & Platteau, J.P., 1994. "Does Hiterogeneity Hinder Collective Action," Papers 146, Notre-Dame de la Paix, Sciences Economiques et Sociales.
- H. Scott Gordon, 1954. "The Economic Theory of a Common-Property Resource: The Fishery," Journal of Political Economy, University of Chicago Press, vol. 62, pages 124.
- Gisser, Micha, 1983. "Groundwater: Focusing on the Real Issue," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 1001-27, December.
- repec:cup:cbooks:9780521297615 is not listed on IDEAS
- Baland, Jean-Marie & Platteau, Jean-Philippe, 1997. "Wealth Inequality and Efficiency in the Commons: Part I: The Unregulated Case," Oxford Economic Papers, Oxford University Press, vol. 49(4), pages 451-82, October.
- Cornes, Richard & Mason, Charles F & Sandler, Todd, 1986. "The Commons and the Optimal Number of Firms," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 641-46, August.
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