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Inequality and Conservation on the Local Commons: A Theoretical Exercise

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  • Dayton-Johnson, Jeff
  • Bardhan, Pranab

Abstract

To analyze the effect of asset inequality on cooperation within a group, we consider a two-player noncooperative model of conservation of a common-pool resource (CPR): a fishery. We give necessary and sufficient conditions such that conservation is a Nash equilibrium, and we show that increasing inequality does not, in general, favor full conservation. However, once inequality is sufficiently great, further inequality may push the players closer to efficiency. Thus the relationship between inequality and economic efficiency is U-shaped. We analyze the implications for conservation if players have earning opportunities outside the commons. Finally, we consider various schemes of community regulation of the commons in the light of the noncooperative model with or without exit options. We find that increases in inequality may restrict the range of implementable mechanisms.

Suggested Citation

  • Dayton-Johnson, Jeff & Bardhan, Pranab, 1996. "Inequality and Conservation on the Local Commons: A Theoretical Exercise," Department of Economics, Working Paper Series qt7f9913w9, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    • Handle: RePEc:cdl:econwp:qt7f9913w9
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    References listed on IDEAS

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    1. David Feeny & Susan Hanna & Arthur F. McEvoy, 1996. "Questioning the Assumptions of the "Tragedy of the Commons" Model of Fisheries," Land Economics, University of Wisconsin Press, vol. 72(2), pages 187-205.
    2. Johnson, Ronald N & Libecap, Gary D, 1982. "Contracting Problems and Regulation: The Case of the Fishery," American Economic Review, American Economic Association, vol. 72(5), pages 1005-1022, December.
    3. Kenneth S. Chan & Stuart Mestelman & Rob Moir & R. Andrew Muller Moir, 1996. "The Voluntary Provision of Public Goods under Varying Income Distributions," Canadian Journal of Economics, Canadian Economics Association, vol. 29(1), pages 54-69, February.
    4. Carlisle Ford Runge, 1981. "Common Property Externalities: Isolation, Assurance, and Resource Depletion in a Traditional Grazing Context," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 63(4), pages 595-606.
    5. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
    6. Sethi, Rajiv & Somanathan, E, 1996. "The Evolution of Social Norms in Common Property Resource Use," American Economic Review, American Economic Association, vol. 86(4), pages 766-788, September.
    7. Pranab Bardhan, 1993. "Symposium on Management of Local Commons," Journal of Economic Perspectives, American Economic Association, vol. 7(4), pages 87-92, Fall.
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    Cited by:

    1. Juan Camilo Cárdenas, 2005. "Local Commons and Cross-Effects of Population and Inequality on the Local Provision of environmental Services," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 62, pages 75-121, Enero-Jun.
    2. Frankel, J-A & Rose, A-K, 1996. "Economic Structure and the Decision to Adopt a Common Currency," Papers 611, Stockholm - International Economic Studies.
    3. Maurice Obstfeld, 1989. "Dynamic Seigniorage Theory: An Exploration," NBER Working Papers 2869, National Bureau of Economic Research, Inc.
    4. Aggarwal, Rimjhim & Narayan, Tulika A., 2000. "Does Inequality Lead To Greater Efficiency In The Use Of Local Commons? The Role Of Strategic Investments In Capacity," Working Papers 28572, University of Maryland, Department of Agricultural and Resource Economics.
    5. Pranab Bardhan, 2019. "Decentralised development," Indian Economic Review, Springer, vol. 54(1), pages 235-253, December.
    6. Barry Eichengreen, 1998. "Exchange Rate Stability and Financial Stability," Open Economies Review, Springer, vol. 9(1), pages 569-608, January.
    7. Molinas, JoseR., 1998. "The impact of inequality, gender, external assistance and social capital on local-level cooperation," World Development, Elsevier, vol. 26(3), pages 413-431, March.
    8. Dayton-Johnson, Jeff, 2000. "Choosing rules to govern the commons: a model with evidence from Mexico," Journal of Economic Behavior & Organization, Elsevier, vol. 42(1), pages 19-41, May.

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